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Oil hovers above $97 as euro gains on dollar

Oil hovers above $97 as euro gains on dollar

May 17th, 2011 by PABLO GORONDI, Associated Press in News

Oil prices lingered above $97 a barrel Tuesday, as the approval in Brussels of a bailout for Portugal and talk of more help for Greece offset concerns that slowing U.S. economic growth could undermine demand for crude.

By early afternoon in Europe, benchmark crude for June delivery was down 2 cents to $97.35 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.28 to settle at $97.37 on Monday.

In London, Brent crude for June delivery was up 36 cents to $111.20 a barrel on the ICE Futures exchange.

Eurozone finance ministers agreed to a 78 billion ($110 billion) bailout of Portugal and said Greece would speed up its financial reforms. That helped boost the euro, which rose 0.5 percent to $1.4213. A weaker dollar makes crude cheaper for investors holding other currencies.

Crude has fallen about 16 percent from near $115 on May 2 as traders fret high fuel costs and tepid economic growth will hurt U.S. consumption. Oil surged 35 percent between February and the beginning of this month.

The end next month of a Federal Reserve program to purchase treasury bonds, known as quantitative easing, could affect market movements. The program has helped boost money supply and asset prices while also weakening the dollar.

"The end of quantitative easing is the sea-change beneath the broader moves" in the oil price, Cameron Hanover said in a report.

Meanwhile, analysts were awaiting the release of U.S. oil stock levels.

Data for the week ending May 13 is expected to show builds of 500,000 barrels in crude oil stocks and of 550,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

"It is likely that the continuing large builds in crude oil inventories will add further pressure in oil prices, amid concerns over a slowdown in the global oil demand," said an energy report from Sucden Financial in London.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration - the market benchmark - will be out on Wednesday.

In other Nymex trading in June contracts, heating oil rose 0.82 cent to $2.8826 a gallon and gasoline gained 1.05 cents to $2.9416 a gallon. Natural gas futures slid 0.4 cent to $4.314 per 1,000 cubic feet.


Alex Kennedy in Singapore and Pan Pylas in London contributed to this report.