Oil hovers near $79 amid rising US oil supplies

[November 11, 2009]  SINGAPORE (AP) -- Oil prices hovered near $79 a barrel Wednesday in Asia as investors mulled rising U.S. oil inventories and a weaker dollar.

Benchmark crude for December delivery down 12 cents to $78.93 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 38 cents to settle at $79.05 on Tuesday.

U.S. oil inventories rose last week, the American Petroleum Institute said late Tuesday. Crude stocks increased 1.2 million barrels while analysts had expected a rise of 1.0 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Information Administration is scheduled to release its supply data on Thursday.

Crude traders are also watching a volatile dollar closely. A weaker dollar makes oil cheaper for investors buying the commodity with non-dollar currencies.

The euro rose to $1.5029 in Asian trading Wednesday from $1.4985 the previous day while the dollar was steady at 89.84 yen.

"Crude prices continue to be driven by the dollar and sentiment," Societe Generale said in a report. "The dollar will be, on balance, moderately bullish for crude oil prices."

Crude has bounced near $80 a barrel for the last few weeks as traders eyed mixed U.S. economic data and the threat of Ida, a one-time hurricane in the Gulf of Mexico that weakened significantly before reaching oil installations near the Gulf Coast on Tuesday.

"The reaction to the data and events has been knee-jerk in nature, and not well thought out by market participants," Societe Generale said.

Oil has risen from $32 a barrel since December, and some analysts expect the upward trend to continue.

"I wouldn't be surprised to see crude trading at $100 before you know it," said Aaron Smith, who uses technical analysis to help manage more than $1 billion of assets for investment firm Superfund Financial in Singapore. "Certainly 20 to 30 percent upside from here is a much more likely proposition than the opposite scenario."

In other Nymex trading, heating oil was steady at $2.05 a gallon. Gasoline for December delivery fell 0.55 cent to $1.97 a gallon. Natural gas for December delivery was steady at $4.47 per 1,000 cubic feet.

In London, Brent crude for December delivery rose 13 cents to $77.63 on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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