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Crude prices near US$80 again

OIL prices rose sharply yesterday on new signs that the U.S. economy has rebounded, though the amount of excess crude continues to grow and there are few signs that actual demand for it has increased significantly.

Benchmark crude for December delivery rose US$2.41 to settle at US$79.87 a barrel on the New York Mercantile Exchange, after hitting a day high of US$80.46 earlier in the session. The contract fell US$2.09 to settle at US$77.46 on Wednesday.

The Commerce Department said the U.S. economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes. The report delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.

"Any sort of encouragement with the economy is potentially bullish for oil," said oil trader and analyst Stephen Schork.

At the same time, global oil companies have reported that crude production grew during the quarter and American Electric Power, one of the biggest U.S. utilities, said yesterday that electricity demand from industrial customers remains weak, but is showing signs of picking up.

Since last week, crude has retreated from US$82 a barrel, the high for 2009, as the U.S. dollar gained back some of its losses from recent months.

The dollar fell yesterday, one of the reasons oil prices have soared this year. Oil is largely bought and sold in dollars, which allows investors holding currencies like the euro or yen to buy more crude when the dollar falls.

In other Nymex trading, heating oil rose 5.73 cents to settle at US$2.0542 a gallon. Gasoline for November delivery added 3.26 cents to settle at US$2.019 a gallon. Natural gas for December delivery gave up less than a penny to settle at US$5.062 per 1,000 cubic feet.

In London, Brent crude for December delivery rose US$2.18 to settle at US$78.04 on the ICE Futures exchange.


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