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Oil up to near US$68 ahead of OPEC meeting

OIL prices climbed to near US$69 a barrel yesterday, helped by rising equity markets, a weaker U.S. dollar and expectations that OPEC will keep its members' output levels steady at this week's meeting.

By mid-afternoon in Europe, benchmark crude for October delivery was up 76 cents to US$68.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract Friday rose 6 cents to settle at US$68.02.

Trading volume was light because of yesterday's Labor Day holiday in the U.S.

With the dollar losing ground against other currencies, commodities like oil and gold were more attractive to investors looking for a hedge against inflation.

The euro bought US$1.4328, up from US$1.4309 late Friday in New York, while the British pound rose to US$1.6404 from US$1.6397.

Surging stock markets also supported oil, as London's FTSE 100 gained 1.6 percent, while Germany's DAX and France's CAC-40 both were up around 1.4 percent.

Traders are eyeing Wednesday's meeting of the Organization of Petroleum Exporting Countries in Vienna. OPEC President Jose Botelho de Vasconcelos, who is also Angola's oil minister, said last week that the 12-member group will likely keep output quotas unchanged.

Crude prices have swung wildly in the past year, reaching US$147 a barrel in July 2008 before plunging to US$32 a barrel in February. Saudi Arabia, OPEC's biggest producer, has said US$75 is a fair price for consumers and producers.

Some analysts predicted prices would soon bounce back, with oil fundamentals continuing to take a back seat to other developments in equities, the position of the U.S. dollar and speculative investments.

"Oil prices are expected to continue to be driven mainly by financial indicators. It seems only a matter of time before another wave of euphoria in equities boosts oil market sentiment," said a report from KBC Market Services in Britain.

"Oil prices may trade lower for a period but a return to the US$70-US$75 (per barrel) range could occur quite soon," KBC said.

In other Nymex trading, gasoline for October delivery was up 1.37 cents to US$1.79 a gallon, and heating oil gained 3.2 cents to US$1.7525 a gallon. Natural gas advanced 3.6 cents to US$2.764 per 1,000 cubic feet.

In London, Brent crude was up US$1.04 to US$67.86 on the ICE Futures exchange.


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