Oil near 8-week high on weak dollar, technicals

Oil near 8-week high on weak dollar, technicals

Tokyo: Oil extended gains toward $82 a barrel on Monday, buoyed by a weaker dollar and signs of an economic recovery in top oil consumer, the United States.

Traders and analysts say currency movements could dominate oil prices as demand strength stays unclear during the recovery.

The euro rose 0.4% to $1.3675, helped at the margins by growing support for debt-laden Greece. The US dollar index, which measures the greenback against a basket of currencies, edged down 0.32%.

French President Nicolas Sarkozy promised Greece on Sunday that euro zone countries would help it overcome its financial problems and vowed a crack down on financial speculators Athens blames for its woes.

Crude for April delivery climbed 44 cents to $81.94 a barrel by 11:55am, after touching $82.04 earlier. On Friday, it rose to $82.07, the highest since $82.34 marked on 12 January.

London Brent crude was up 48 cents at $80.37.

New York crude has traded in a range of $69 to $84 over the past few months amid uncertainty about the speed of the global economic recovery.

“In the past few days, market moves have been led by technicals," said Tomokazu Amano, analyst at Mitsubishi Corp Futures & Securities in Tokyo.

“Now that $80 or higher is here to stay, we are seeing an influx of speculative money from funds and others."

Money managers extended their net long crude oil futures position on the New York Mercantile Exchange in the week through 2 March, the Commodity Futures Trading Commission said on Friday.

The key speculator group hiked net long positions to 144,058 during the week, up from 132,504 in the week to 23 February.

Oil also got support from higher Asian shares, which tracked a rally in the US markets to an 18-month closing high on Friday. Japan’s Nikkei average and South Korean shares closed up more than 1.5%.

“The strength in Asian shares was providing support, but it’s difficult to grasp the market’s direction," said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.

“Although the market hit $82 today helped by the US jobs report, it’s difficult to buy further."

Oil also got support after news that China, the world’s second-biggest oil consumer, will build two strategic oil reserve bases in Guangdong province, in Huizhou and Zhanjiang.

Chinese oil demand is likely to see a further boost in the next few years as the country seeks crude to stash in its state oil reserves, which it plans to expand rapidly in the coming decade.

China’s crude oil output will rise by 1-2% this year, and state-owned China National Petroleum Corp (CNPC) group will refine 11.4% more crude oil in 2010, a CNPC executive said on Sunday.

With oil prices within their comfort zone of $70-80 per barrel and demand expected to revive, the Organization of the Petroleum Exporting Countries (OPEC) looks set to keep its production target unchanged on 17 March, as it has done for more than a year.

Oil producers are pumping more crude than consumers need but the oversupply is insufficient to have a big impact on the market, Iran’s Opec governor said on Sunday.

Oil market participants were also paying attention to the election in Iraq. Bomb blasts and rocket and mortar fire killed 38 people as Iraqis voted on Sunday in an election they hoped would distance their nascent democracy from years of sectarian slaughter as US troops pack up to leave.