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Mon 23 Aug 2010 01:20 PM

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Oil above six-week low as dollar slips

UPDATE 1: Market gains support from the weaker US$, which makes oil cheaper for holders of other currencies.

Oil above six-week low as dollar slips
BLACK GOLD: The market gained support from the weaker US dollar, which makes oil cheaper for holders of other currencies. (Getty Images)

Oil rose above $74 a barrel on Monday from last week's six-week low, although bulging US inventories and a lack of hurricane activity in the Gulf of Mexico limited gains.

Analysts said the market gained support from a weaker US dollar, which makes oil cheaper for holders of other currencies, and from firmer European equities, which bounced back from a one-month low.

US crude for delivery in October was up 45 cents to $74.27 a barrel by 1231 GMT, close to the intraday high of $74.42. October Brent crude was up 54 cents to $74.80.

"We're still basically trading sideways and close to the bottom of the range, but I don't think we're necessarily into a nosedive," said Christopher Bellew, a broker at Bache Commodities in London.

"Demand from developing countries such as China is supportive, and on the bearish side there's fears of weak demand in Western economies."

Oil in New York ended last week at the lowest since early July, after prices touched an intraday low of $73.19. Prices have fallen more than 10 percent from an Aug. 4 high of $82.97.

Even though forecasts are for the Atlantic hurricane season to be the most active in five years, analysts said there was little imminent threat of hurricane-related disruptions to oil output or refining in the Gulf of Mexico.

Tropical Storm Danielle in the central Atlantic was expected to strengthen into a hurricane in the next 24 hours as it moved west-northwest towards Bermuda, the US National Hurricane Center said.

"The upcoming storm in the Atlantic is expected to deviate north and will again be a storm that will not have any impact on oil assets in the US Gulf," said Olivier Jakob, analyst at Petromatrix, in a report.

Oil this year has traded in a $64.24-$87.15 range as recovering demand has been insufficient to drain ample supplies. US petroleum stocks have climbed to a record since weekly records began in 1990.

"We've broken some short-term support at around $74.50 and the next short-term support would be around $72," Bellew said, referring to Brent crude.

Last week's economic reports included data showing US jobless claims hit a nine-month high and US regional manufacturing contracted for the first time in a year, reviving fears of a double-dip recession in the world's largest economy.

Investors' interest in oil diminished last week. Money managers cut net long crude oil positions on the New York Mercantile Exchange, the Commodity Futures Trading Commission said on Friday. (Reuters)