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Oil prices up 12 percent in 2 weeks

OIL prices are again flirting with US$80 a barrel after a two-week rally fueled by promising economic reports and worries that troubles in Europe and the Middle East could eventually tighten supplies.

Benchmark crude for March delivery added 75 cents to settle at US$79.81 a barrel on the New York Mercantile Exchange. The price of the March contract, which ends Monday, has increased by 12 percent since Feb. 5.

Most of the trading already has moved to the April contract, which added 64 cents yesterday to settle at US$80.06 a barrel.

In London, Brent crude added 41 cents to settle at US$78.19 on the ICE futures exchange.

The rally in crude comes even though the U.S. is still flush with very large supplies. Reports of growth in home construction, industrial production and manufacturing have boosted confidence among investors that Americans will regain their appetite for fossil fuels in the second half of the year.

Meanwhile, investors continued to focus on problems with refineries in France, where workers at a refinery for oil giant Total have been striking since Jan. 12. The U.S. imports gasoline and other fuels from Europe, and concerns over disruptions in European refining have helped push energy prices higher.

Energy prices dipped earlier in the day following Thursday's Federal Reserve announcement that it will bump up the rate that banks must pay for emergency loans.

The dollar soared to its highest level since May following the announcement. And crude, which is priced in dollars, tends to fall in price as the dollar rises and makes oil barrels tougher to buy for investors holding foreign money.

The Fed announcement was followed by a Labor Department report yesterday morning that said consumer prices excluding food and energy fell in January for the first time since December 1982. That tempered concerns about future inflation, analyst Phil Flynn said.

In other Nymex trading in March contracts, heating oil rose 1.83 cents to settle at US$2.0699 a gallon, and gasoline added 1.65 cents to settle at US$2.0857 a gallon. Natural gas gave up 12.8 cents to settle at US$5.044 per 1,000 cubic feet.


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