Oil stays above $61 amid weakening US dollar

[May 22, 2009]  LONDON (AP) -- Oil prices held above $61 a barrel Friday, helped by a weakening dollar, which typically has an inverse relationship with crude markets. Investors often buy commodities such as oil as a protection against the inflation that can result from a weaker U.S. dollar.

Benchmark crude for July delivery was up 49 cents to $61.54 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. On Thursday, the contract fell 99 cents to settle at $61.05.

The dollar fell Friday to a four-month low against the euro, which was trading at $1.3948. The dollar bought 94.15 yen, down from 99 yen two weeks ago.

Crude prices have also been buoyed this week by two refinery fires in the U.S. and renewed fighting between the government and rebels in oil-rich Nigeria, Africa's largest oil producer.

Investors brushed off pessimistic comments this week from the U.S. central bank. The Federal Reserve sees "significant downside risks" for the U.S. economy, with the global financial system still "vulnerable to further shocks," according to minutes of a Fed meeting released this week.

The comments helped push stocks down, with the Dow Jones industrial average falling 1.5 percent Thursday. Most Asian stock indexes also dropped Friday, while in Europe most showed slight gains.

Olivier Jakob of Petromatrix in Switzerland said that oil prices holding on near $60 a barrel was a "further sign of confirmation that crude oil is starting to have a trading life of its own rather than being a pure correlation to equities."

Oil prices have jumped about 75 percent since March on expectations the worst of a severe recession is over.

"We're going to see a recovery but it looks like its going to be very muddled," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "If stocks keep falling, oil will eventually follow."

In other Nymex trading, gasoline for June delivery rose 1.11 cents to $1.8108 a gallon and heating oil gained 0.6 cent to $1.5354 a gallon. Natural gas for June delivery was up 0.2 cent to $3.605 per 1,000 cubic feet.

In London, Brent prices rose 49 cents to $60.42 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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