Oil above $72 on weaker dollar, US data

Wednesday, June 17, 2009

LONDON: Oil rose $2 to above $72 a barrel on Tuesday as the dollar slid and US housing data showed a jump in new construction starts and permits.

US crude rose $2.07 cents to $72.69 by 1312 GMT, after trading below $70 when the dollar was stronger. London Brent crude rose $2.11 to $72.35.

“The housing data was quite good, but stock markets are not shooting away just yet,” said trader Robert Montefusco at Sucden Financial. “The dollar is still the main crux of it.”

The dollar fell broadly as higher European shares piqued appetite for currencies seen as higher risk, and lost more ground after the US housing data.

A weaker dollar can strengthen commodity markets by improving the purchasing power of buyers using other currencies. The Commerce Department said on Tuesday US housing starts jumped 17.2 per cent to a seasonally adjusted annual rate of 532,000 units, from April’s revised 454,000 units, and new building permits rose 4 per cent, the biggest advance since June last year.

Iran’s top legislative body ruled out annulling a disputed presidential election that has prompted the biggest street demonstrations since the 1979 Islamic revolution, but said it was prepared for a partial recount.

The world’s fifth-biggest oil exporter has seen three days of the largest and most violent anti-government protests in three decades, though no disruption to Iran’s 2.1 million barrels-per-day exports have been felt.

“We’ve seen a downward spiral over the years in light of sanctions in Iran’s ability to bring projects online. It’s a slow trend that had pretty much been continuously priced in,” said Samuel Ciszuk, analyst at IHS Global Insight in London.

Expectations of an economic recovery drove crude prices to a near eight-month high above $73 a barrel last week. Traders will look out for weekly US government inventory data on Wednesday, which is expected to show a 1.8-million barrel fall in crude oil stocks, a 600,000-barrel rise in gasoline stocks and 900,000 barrel rise in distillate stocks, based on a preliminary Reuters’ poll.

The American Petroleum Institute (API) will issue its report later in the day. With oil rising almost $20 since the end of April, there were concerns that speculation in the market had pushed oil prices up too high, too fast.

OPEC Secretary-General Abdullah al-Badri said too quick a rise in oil prices, could harm a global economic recovery, though a price of $80 a barrel would not stem growth.

The head of the International Monetary Fund, Dominique Strauss-Kahn, also sounded a cautious note, saying on Monday the worst of the global crisis was not yet over.

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