Oil hovers below $74 as traders eye dollar, stocks

[January 29, 2010]  COLOMBO, Sri Lanka (AP) -- Oil prices rose slightly Friday, helped by a slight pullback by the U.S. dollar and optimism in European stock markets, but remained near a six-week low under $74.

By early afternoon in Europe, benchmark crude for March delivery was up 14 cents to $73.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 3 cents to settle at $73.64 on Thursday, the lowest since Dec. 14 when crude dropped to $73.46.

Oil has skidded about 12 percent since reaching $84 a barrel earlier this month as investors eye a stronger dollar and slumping equities. Traders often buy commodities such as oil as a hedge against inflation and a weaker dollar and sell them when the U.S. currency rises.

On Friday, however, the dollar lost some ground to the main European currencies. The euro bought $1.3962, up from Thursday's low of $1.3938 -- the euro's weakest level since July 2009 -- while the British pound rose to $1.6151 from $1.6127.

Despite the slight rise on Friday, oil prices still looked to be heading toward ending their third straight week lower, with a skeptical outlook seen prevailing.

"A day of rising prices does not mean that perception is changing significantly," said Mike Fitzpatrick, vice president of energy at broker MF Global in New York. "A fall of $10 in a little over two weeks is probably just too tempting to resist."

Investors are also looking at U.S. crude demand, which has so far not rebounded strongly from a slide last year.

"A clear turning point in the U.S. demand cycle is yet to be reached, still waiting for distillate demand to kick in," Barclays Capital said in a report.

In other Nymex trading in February contracts, heating oil was up 0.27 cent at $1.9218 a gallon and gasoline rose 0.66 cent to $1.9240 a gallon. The March contract for natural gas gained 9.6 cents to $5.234 per 1,000 cubic feet.

In London, Brent crude for March delivery was up 18 cents to $72.31 a barrel 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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