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Weak dollar gives oil yet another boost

THE weakened dollar boosted oil prices once again yesterday, ending a two-day slump.

Benchmark crude for August delivery rose US$1.74 to settle at US$69.24 a barrel on the New York Mercantile Exchange.

There has been some optimism about an economic rebound, which would tend to lift energy markets, but the value of the U.S. currency is playing an even bigger role in prices for everything from oil to gasoline on Nymex.

Crude is priced in the U.S. currency and a lot of money has flooded into the market with big investors using oil as a hedge against inflation. The dollar fell 2.37 cents against the euro yesterday.

Energy experts believe the falling dollar has resulted in artificially high prices for the past couple of months. Retail gas prices rose every day for nearly two months until Monday, though they remain well below last summer's prices.

Just how much the dollar is influencing energy prices may become clear Wednesday, as the Federal Reserve meets to talk about U.S. interest rates.

Few expect that rates will be raised right now, but everyone will be parsing the language of the Fed statement to determine if a rate hike is even possible in the near term.

Another sign of how much demand there is for crude and gasoline arrives today when the government releases its weekly supply report.

Millions of barrels of unused gasoline are being pumped into storage houses and the Energy Department is likely to report more of the same on Wednesday.

Prices at the pump fell for a second straight day yesterday after a moving up 54 straight days. Prices slipped 0.7 cents to an average of US$2.683 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 26.5 cents higher than a month ago, but US$1.389 below where they were a year ago.

In other Nymex trading, gasoline for July delivery rose 3.35 cents to settle at US$1.8932 a gallon and heating oil rose 4.15 cents to settle at US$1.769. Natural gas for July delivery fell 6.4 cents to settle at US$4.007 per 1,000 cubic feet.

In London, Brent prices rose US$1.82 to settle at US$68.80 a barrel on the ICE Futures exchange.


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