Oil hovers near $72 as US crude inventories plunge

[September 11, 2009]  WASHINGTON (AP) -- Oil prices hovered near $72 a barrel Friday as a drop in U.S. crude inventories suggested demand may be picking up and the dollar continued to slump against other currencies, boosting commodities.

By midday in Europe, benchmark crude for October delivery was down 19 cents at $71.75 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose 63 cents to settle at $71.94.

Crude has traded between $65 and $75 for a few months as investors struggle to gauge the strength of the global economic recovery.

Evidence of a sustained rebound in crude consumption could trigger a break out of that price range, although many analysts predict oil prices will likely remain near current levels for some time.

"We continue to favor a range rather than a trend," said Olivier Jakob from Petromatrix in Switzerland.

The Energy Information Administration said Thursday that crude inventories fell by 5.9 million barrels last week, more than three times estimates of analysts surveyed by Platt's, the energy information arm of McGraw-Hill Cos.

Oil has jumped $4 this week as investors eyed rising stock markets and a slumping U.S. dollar. Some investors buy into commodities such as oil and gold as a hedge against inflation and dollar weakness.

The Dow Jones industrial average rose 0.8 percent Thursday for its fifth day of gains. On Friday, the euro rose to $1.4596 from $1.4574 late Thursday in New York and the British pound rose to $1.6709 from $1.6665, while the dollar slid to 90.90 Japanese yen from 91.74 yen.

The Organization of Petroleum Exporting Countries, which decided to leave output levels unchanged at a meeting Thursday in Vienna, said it was cautious about the outlook for an economic recovery.

"There remains great concern about the magnitude and pace of this recovery," said OPEC, which pumps about 40 percent of the world's oil production

In other Nymex trading, gasoline for October delivery fell 0.22 cent to $1.8014 a gallon, and heating oil retreated 0.77 cent to $1.79 a gallon. Natural gas was down 2.1 cents to $3.235 per 1,000 cubic feet.

In London, Brent crude lost 14 cents to $69.72 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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