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Oil settles higher on weak dollar

OIL prices increased for the third day in a row as the dollar weakened and auto club AAA reported that more drivers are expected on America's highways next week.

Benchmark crude for December delivery added 44 cents yesterday to settle at US$79.58 a barrel on the New York Mercantile Exchange. Most of the trading had already passed to the January contract, which rose 38 cents to settle at US$80.10 a barrel.

The weak dollar has helped boost oil prices most of the year. Crude prices, which are priced in U.S. currency, tend to rise as the dollar falls and investors holding strong international currencies get more buying power.

AAA also reported yesterday that 33.2 million Americans would get in their cars and travel at least 50 miles (80 kilometers) over the Thanksgiving weekend, next yesterday through Sunday. That's an increase of 2.1 percent from 2008, even though a gallon of gas is 56 cents more expensive than the same time last year.

AAA, which based its report on a telephone survey, said the increase was a sign that consumers are more confident in the economy.

Meanwhile, the Energy Information Administration reported that the country's stockpile of crude oil fell by 900,000 barrels last week. But the drop was hardly a sign of a recovering economy.

American petroleum consumption has dropped to the lowest level since July 17, and oil companies are importing much less oil as they scale back their refining operations.

"Demand is still very, very weak," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "It's keeping us from sharing in the bullish euphoria that you're seeing in the stock market."

Some analysts expect weak global economic growth to keep commodities like oil from surging much higher. Global growth will likely average 2.5 percent a year during the next three years, about half the rate between 2002 and 2007, said Stephen Roach, Asia Chairman for Morgan Stanley.

"I don't see commodities repeating the boom-like surges," Roach said in Singapore.

In other Nymex trading, heating oil lost less than a penny to settle at US$2.0486 a gallon. Gasoline for December delivery added less than a penny to settle at US$2.0114 a gallon. Natural gas for December delivery gave up 27.6 cents to settle at US$4.254 per 1,000 cubic feet.

In London, Brent crude for December delivery added 50 cents to settle at US$79.47 on the ICE Futures exchange.


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