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Oil up again, settles above US$79

OIL prices pushed higher for a second straight day yesterday even though the dollar strengthened and fresh economic data gave mixed signals on whether demand for oil will increase.

Benchmark crude for December delivery rose 24 cents to settle at US$79.14 a barrel in afternoon trading on the New York Mercantile Exchange.

The euro dropped back below US$1.49 yesterday after banking officials in Europe and the U.S. voiced support for the dollar.

A falling dollar has helped drive oil prices after crude bottomed at US$32 a barrel nearly a year ago. Because crude is traded in dollars, an investor can trade euros for dollars and then buy oil for a relative bargain.

At the same time, industrial production for October rose less than expected, suggesting that the economic recovery - and oil demand - will continue to be bumpy.

Even with Monday's strong gain, oil has traded in a range of US$75 to US$82 for the past several weeks.

Demand for oil continues to be weak and supplies are more than ample, and that is keeping oil prices restrained as prices for other commodities, such as gold, continue to climb because of the weaker dollar, PFGBest analyst Phil Flynn said.

Gasoline demand for the week ended Friday rose 2.1 percent from the depressed levels of a year ago when the financial crisis battered demand, according to the weekly MasterCard SpendingPulse report. Still, demand is 1 percent below 2007 levels.

MasterCard's report is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check.

Traders also are waiting for the government's weekly oil inventory report on Wednesday. Analysts expect an increase in crude and gasoline stocks and a decline in distillates used to make heating oil and diesel fuel, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

This week's numbers may be skewed by Hurricane Ida, which shut down some oil and gas production in the Gulf of Mexico for a couple of days last week.

In other Nymex trading, heating oil rose 2.65 cents to settle at US$2.0585 a gallon. Gasoline for December delivery added 1.81 cents to settle at US$2.0049 a gallon. Natural gas for December delivery fell 8.4 cents to settle at US$4.530 per 1,000 cubic feet.

In London, Brent crude for December delivery gained 21 cents to settle at US$78.97 on the ICE Futures exchange.


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