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Oil rises to near $99 on weaker US dollar

business Updated: May 09, 2011 11:09 IST
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Oil prices rose to near $99 a barrel on Monday in Asia, bouncing back from last week's plunge, as a weaker US dollar made commodities less expensive for investors with other currencies.

Benchmark crude for June delivery was up $1.65 to $98.83 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $2.62 to settle at $97.18 on Friday.

In London, Brent crude for June delivery was up $1.53 to $110.66 a barrel on the ICE Futures exchange.

Oil prices fell 15% last week as the dollar strengthened and traders worried that slowing US economic growth didn't justify a 35% increase from February to near $115 on May 2.

The euro rose to $1.4393 on Monday from $1.4312 on Friday while the dollar dropped to 80.59 yen from 80.63.

Some analysts are taking heart from a larger-than-expected increase in US jobs in April. Non-farm payrolls rose by 244,000 jobs in April, while the unemployment rate rose to 9.0% from 8.8% in March.

"The fundamental backdrop in the market remains entirely unaltered, with global oil demand still showing continued strength," Barclays Capital said in a report. "The general (oil price) trend from here should be higher, rather than lower."

Other analysts expect oil to drop as higher US gasoline prices up 37% from a year ago undermine crude demand. US gross domestic product growth slowed to 1.8% in the first quarter.

"Demand destruction already appears to be well under way in the US, reflected in the latest GDP data," Capital Economics said in a report. "We expect oil to fall further as the global economy slows, the dollar continues to rebound, and the risk premium due to unrest in the Middle East eventually fades."

In other Nymex trading in June contracts, heating oil rose 4.0 cents to $2.89 a gallon and gasoline added 4.8 cents to $3.14 a gallon. Natural gas futures were up 4.8 cents at $4.28 per 1,000 cubic feet.