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Oil falls back below US$70 even as dollar weakens

OIL prices fell sharply yesterday, giving up some of the gains crude made this week even as the dollar fell to a fresh low for 2009.

Benchmark crude for October delivery tumbled US$2.65 to US$69.29 a barrel on the New York Mercantile Exchange. On Thursday, the contract rose 63 cents.

Gasoline, heating oil and natural gas prices also were down. Natural gas prices had jumped 15 percent on Thursday and then fell 9 percent yesterday.

Oil had been up more than US$4 this week and rose as much as 96 cents to US$72.90 yesterday as investors eyed rising stock markets and a slumping US dollar, but the rally stalled yesterday.

Crude is priced in dollars so it becomes cheaper when the dollar falls. Some investors also use commodities such as oil and gold as a hedge against inflation and dollar weakness. Gold was back above US$1,000 an ounce yesterday.

Addison Armstrong of Tradition Energy said this week's increase in crude prices was not justified and called yesterday's sell-off a "nice dose of profit-taking."

"The demand picture for refined products remains very weak and supplies are very robust," he said.

Signs of an improved economic outlook have fueled optimism for growing demand for crude around the world. Still, demand for crude remains poor and supplies of gasoline, diesel fuel and heating oil are at high levels.

Even with the swings this week, Armstrong said crude has remained stuck in a range between US$67 and US$75 since early August.

The 16-nation euro bought US$1.4613 in European trading, up from US$1.4585 late Thursday in New York and the highest level so far in 2009.

In other Nymex trading, gasoline for October delivery fell 4.38 cents to US$1.7598 a gallon, and heating oil declined 4.77 cents to US$1.7308 a gallon. Natural gas was off 29.6 cents to US$2.96 per 1,000 cubic feet.

In London, Brent crude fell US$2.23 to US$67.66 on the ICE Futures Exchange.


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