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Oil shoots above US$71 a barrel on weak dollar

CRUDE prices settled above US$71 a barrel yesterday as a falling dollar pushed investors to seek out commodities such as oil and gold.

Benchmark crude for October delivery gained US$3.08 to settle at US$71.10 a barrel on the New York Mercantile Exchange. The contract had settled at US$68.02 on Friday after rising 6 cents.

The dollar fell to a low for the year yesterday against the euro and several other currencies as gold prices surpassed US$1,000 an ounce for the first time since February.

Investors often turn to commodities as a hedge against inflation and dollar weakness, and gold seems to be pulling oil along for the ride, said PFGBest analyst Phil Flynn.

"The move in metals has oil reluctantly rallying higher," Flynn said in his morning report. "Normally crude oil would be worrying about the upcoming OPEC meeting as opposed to worrying about the gold market."

Leaders of the Organization of Petroleum Exporting Countries have signaled they plan to keep output levels unchanged at the group's meeting Wednesday in Vienna. That could send oil prices lower as traders expect OPEC members to increasingly exceed the group's official production quotas.

Saudi Arabian oil minister Ali Naimi said yesterday that crude markets were "in good shape," boosting expectations OPEC will use its meeting this week to stress compliance with output quotas instead of cutting production.

In other Nymex trading, gasoline for October delivery rose 5.26 cents to US$1.8289 a gallon, and heating oil gained 6.2 cents to US$1.7825 a gallon. Natural gas rose 7.9 cents to US$2.807 per 1,000 cubic feet.

In London, Brent crude was up US$2.89 to US$69.42 on the ICE Futures exchange.


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