Oil falls back below $70 even as dollar weakens

[September 12, 2009]  WASHINGTON (AP) -- Oil prices fell sharply Friday, giving up some of the gains crude made this week even as the dollar fell to a fresh low for 2009.

Benchmark crude for October delivery tumbled $2.65 to $69.29 a barrel on the New York Mercantile Exchange. On Thursday, the contract rose 63 cents.

Gasoline, heating oil and natural gas prices also were down. Natural gas prices had jumped 15 percent on Thursday and then fell 9 percent Friday.

Oil had been up more than $4 this week and rose as much as 96 cents to $72.90 Friday as investors eyed rising stock markets and a slumping U.S. dollar, but the rally stalled Friday.

Crude is priced in dollars so it becomes cheaper when the dollar falls. Some investors also use commodities such as oil and gold as a hedge against inflation and dollar weakness. Gold was back above $1,000 an ounce on Friday.

Addison Armstrong of Tradition Energy said this week's increase in crude prices was not justified and called Friday's sell-off a "nice dose of profit-taking."

"The demand picture for refined products remains very weak and supplies are very robust," he said.

Signs of an improved economic outlook have fueled optimism for growing demand for crude around the world. Still, demand for crude remains poor and supplies of gasoline, diesel fuel and heating oil are at high levels.

Even with the swings this week, Armstrong said crude has remained stuck in a range between $67 and $75 since early August.

The 16-nation euro bought $1.4613 in European trading, up from $1.4585 late Thursday in New York and the highest level so far in 2009.

Prices at the pump rose 0.4 cents overnight to $2.58 a gallon, according to travel club AAA, Wright Express and Oil Price Information Service. Prices at the pump are 6.5 cents below levels of a month ago and down $1.091 from a year ago.

In other Nymex trading, gasoline for October delivery fell 4.38 cents to $1.7598 a gallon, and heating oil declined 4.77 cents to $1.7308 a gallon. Natural gas was off 29.6 cents to $2.96 per 1,000 cubic feet.

In London, Brent crude fell $2.23 to $67.66 on the ICE Futures Exchange.

[Associated Press; By MARK WILLIAMS]

Associated Press writers Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.

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