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Oil rises ahead of economic reports

OIL prices rose yesterday, rebounding after an earlier drop as the dollar lost ground and investors waited for more clues on the strength of the U.S. economic recovery.

Benchmark crude for November delivery rose 82 cents to settle at US$66.84 a barrel on the New York Mercantile Exchange.

Friday's fire at a Tesoro refinery in Los Angeles, which processes roughly 100,000 barrels of crude oil a day into gasoline, jet fuel and other products, will likely lead to some higher pump prices in California, but the effect is muted elsewhere in the U.S., said analyst and trader Stephen Schork.

Gasoline demand is so weak that even "a material disruption to supply to one of the largest markets in the world barely registered with the speculators on the NYMEX," Schork wrote.

Still, energy prices for the most part rebounded to start the week on the New York Mercantile Exchange, particularly crude, which hit a two-month low on Thursday.

A couple of factors this week are helping to support futures prices, even though the government reported Wednesday that oil supplies increased by millions of barrels in the prior week.

The dollar index fell again, meaning oil is cheaper on international markets. There was also an oil spill in the Houston Ship Channel, closing off a portion of the heavily trafficked canal.

In addition, after crude prices tumbled 8 percent last week, world leaders issued a stern warning to Iran over a previously unknown nuclear facility. About 20 percent of the world's crude is carted through the Straits of Hormuz on Iran's southern coast and any showdown between the West and Iran could threaten that route.

But PFGBest analyst Phil Flynn said oil producers are waiting in line ready to pick up that extra slack.

"Saudi Arabia has enough spare production capacity to replace Iran's exports two times over," Flynn wrote.

In the U.S., the most closely watched economic indicator this week will be the Labor Department's monthly jobs report on Friday. Investors will also get reports on home prices, manufacturing, consumer confidence, construction spending and factory orders.

Natural gas prices continue to fall. Most trading has already moved onto the November contract, with the October contract expiring yesterday. Prices for November delivery fell 11.8 cents to settle at US$4.83 per 1,000 cubic feet because some key storage facilities are nearing capacity.

In other Nymex trading, heating oil gained 1.38 cents to settle at US$1.6909 a gallon. Gasoline for October delivery rose 1.75 cents to settle at US$1.638 a gallon.

In London, Brent crude rose 43 cents to settle at US$65.54 on the ICE Futures exchange.


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