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Oil above US$67 amid Dow rally

OIL prices were pulled higher yesterday by a rally on Wall Street and a rise in home sales that suggested the U.S. may soon regain its appetite for energy.

Benchmark crude for September delivery added US$1.76 to settle at US$67.16 a barrel on the New York Mercantile Exchange. In London, Brent prices rose US$2.04 to settle at US$69.25 a barrel on the ICE Futures exchange.

A weaker dollar also helped buoy oil prices. Oil, which is used as a hedge against inflation, tends to rise in price as the dollar falls. The U.S. Dollar Index, which measures the dollar against other major currencies, lost 0.17 points yesterday, trading at 78.535.

Crude prices have been rising now for two weeks and retail gasoline prices, which fell for 30 straight days, reversed course on Tuesday and began to climb.

There are still large surpluses of crude as well, but that hasn't stopped rising prices.

"Demand has been unimpressive, and yet the market has shrugged it off," said Andrew Lebow, senior vice president and broker at MF Global. "And they have for the past few weeks."

On yesterday, the government reported that natural gas supplies also grew as manufacturers and other large users cut back.

Steve Chazen, chief financial officer at Occidental Petroleum Corp., said the company expects third-quarter production to be flat versus second-quarter levels, in part because weak sales of natural gas has slowed some drilling.

Still, oil prices jumped in morning trading as the Dow Jones industrial average rose above 9,000 mark. The last time the blue chips closed higher was on Jan. 6.

Investors also cheered a National Association of Realtors report that said sales of previously occupied homes rose for the third month in a row. The last time that happened was in the middle of the housing boom in early 2004.

In other Nymex trading, gasoline for August delivery climbed 7.49 cents to settle at US$1.9132 a gallon and heating oil added 5.32 cents to settle at US$1.7644 a gallon. Natural gas for August delivery lost 24.3 cents to settle at US$3.55 per 1,000 cubic feet.


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