Oil hovers above $77 as euro steadies after plunge

[May 07, 2010]  SINGAPORE (AP) -- Oil prices hovered above $77 a barrel Friday in Asia, halting an 11 percent sell-off this week as the euro strengthened against the dollar.

Benchmark crude for June delivery was up 29 cents to $77.40 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The June contract lost $2.86 to settle at $77.11 on Thursday.

Crude prices have fallen from an 18-month high of $87.15 that was hit Monday. That level was reached as the dollar surged against the euro amid investor concern a $142 billion bailout package for Greece won't be enough to keep the debt crisis from spreading to other European countries.

Commodities priced in dollars, such as oil, become more expensive for investors holding euros as the U.S. currency strengthens.

The euro, which fell to a 14-month low of $1.2520 on Thursday, rose to $1.2741 on Friday while the dollar jumped to 92.17 yen from 90.78 yen.

"Fear of contagion to Spain and Portugal is being taken very seriously," Sander Capital Advisors said in a report. "If the euro continues to trade lower it will put additional pressure on oil."

Plunging global stock markets have also weighed on oil prices. Crude traders often look to equities as a barometer of overall investor sentiment, and the Dow Jones industrial average fell 3.2 percent Thursday.

All major Asian stock indexes were down Friday.

Some analysts expect oil prices to rebound as a global economic recovery boosts crude demand. Investors will be eyeing the Labor Department's April employment report, due out later Friday, for signs the U.S. economy is growing.

"We view the fall in prices as transitory, as there has been hardly been any deterioration in oil market fundamentals," Barclays Capital said in a report.

In other Nymex trading in June contracts, heating oil was steady at $2.115 a gallon, and gasoline held at $2.157 a gallon. Natural gas was little changed at $3.926 per 1,000 cubic feet.

In London, Brent crude was up 30 cents to $80.14 on the ICE futures exchange.

[Associated Press; By ALEX KENNEDY]

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