Oil drops below $74 as traders watch US dollar

[December 08, 2009]  SINGAPORE (AP) -- Oil prices dropped below $74 a barrel Tuesday in Asia after a strengthening U.S. dollar extended a four day sell-off in crude to two-month lows.

Benchmark crude for January delivery was down 6 cents to $73.87 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.54 to settle at $73.93 on Monday.

The dollar, boosted by a better than expected U.S. jobs report last week, helped push oil prices out of a two-month range of between $75 and $82.

Investors have been buying crude as a hedge against inflation as the dollar has slid this year amid massive government stimulus spending and low interest rates. When the dollar rises, traders tend to sell their positions in oil.

"The movement of the dollar has continued to be a leading driver of oil pricing," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "But when the price falls to the mid-$70s, many market participants see that as a buying opportunity."

In Asian trade, the dollar was mixed. The euro fell to $1.4805 from $1.4820 in New York late Monday while the dollar fell to 89.04 yen from 89.49.

In other Nymex trading in January contracts, heating oil was steady at $2.01 while gasoline rose 0.54 cent to $1.94. Natural gas jumped 7.0 cents to $5.04 per 1,000 cubic feet.

In London, Brent crude for January delivery rose 22 cents to $76.65 on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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