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Oil price hits six-month high above 59 dollars

business Updated: May 12, 2009 17:18 IST

AFP
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The price of New York crude oil reached 59.68 dollars a barrel on Tuesday, the highest level for six months as the US currency slid against leading currencies, traders said.

New York's main futures contract, light sweet crude for delivery in June, reached the highest point since mid-November before standing at 59.39 dollars a barrel, up 89 cents on Monday's close.

Brent North Sea crude for delivery in June rose 82 cents to 58.30 dollars a barrel.

Crude oil prices have won support in recent days from rallying stock markets and a falling dollar rather than signs of rebounding demand for energy, according to analysts.

"This market seems to have found a bit of a comfort zone (at current price levels)," said Dave Ernsberger, a senior editorial director at energy information provider Platts.

A weaker US currency makes dollar-denominated crude cheaper for buyers of oil holding stronger currencies.

The dollar on Tuesday approached a seven-week low point against the euro as safe-haven demand for the greenback declined on hopes of an improvement in the battered global economy, dealers said.

Many market watchers believe the dollar is likely to decline against most rival currencies in the coming months as risk aversion recedes.

However Ernsberger said he expects the rally in oil prices to weaken as the ailing global economy will keep demand down. "There's not much steam left in the rally. The market's done a lot in the short span of time, there's not much it can do in this economic environment," he said.

The market was waiting for the weekly US energy inventory report due Wednesday for signs of strengthening demand in the world's biggest economy, which is reeling from a deep recession.

Traders were also awaiting the outcome of an OPEC output meeting on May 28.

OPEC secretary general Abdalla Salem El-Badri said recently that the cartel wants to see crude at more than 70 dollars a barrel, as its members appeared divided on whether to further reduce output to support prices.

The Organization of Petroleum Exporting Countries pumps about 40 percent of world crude, while its members have seen their incomes slide over the past year as the price of oil has slumped from record highs of above 147 dollars a barrel.