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Oil
prices sustain rising profile as weaker dollar boosts
demand
CRUDE oil rose for a second straight day as a weaker dollar encouraged buying of commodities and stronger equity markets signaled optimism that the economic recovery is proceeding.
Oil rose, tracking stock markets in Europe and Asia, as the Group of 20 nations agreed on steps to shore up the global financial system. The U.S. currency weakened against the euro for a second day. All 26 analysts surveyed by Bloomberg News predicted Organisation of Petroleum Exporting Countries (OPEC) will maintain its daily production target at 24.845 million barrels at a September 9 meeting in Vienna.
"Oil is a bit supported by the weaker dollar and stronger equities," said Eugen Weinberg, a senior analyst with Commerzbank AG in Frankfurt. "We know that OPEC will not cut. The question is how this will be taken by the market."
Crude oil for October delivery rose as much as 89 cents, or 1.3 per cent, to $68.91 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $68.74 at 2:52 p.m. London time. It earlier fell as much as 48 cents, or 0.7 per cent, to $67.54.
Europe's Dow Jones Stoxx 600 Index advanced 1.5 per cent to 237.25 at 2:40 p.m. in London. The dollar weakened to $1.4338 against the euro from $1.4297 on September 4. A weaker dollar encourages investors to buy oil as a hedge against inflation.
Finance ministers and central bankers from the Group of 20 nations left weekend talks in London after pledging to shore up the international financial system with tighter regulation.
Oil futures fell 6.5 per cent last week, the biggest drop since the week ended July 10. Prices decreased as a slump in equity prices rattled investor confidence in the global recovery and as gasoline futures fell.
"Sentiment is a bit better because of the increasing equity markets, but nevertheless we are seeing lower oil prices compared with a few weeks ago," said Sintje Diek, an analyst with HSH Nordbank in Hamburg, Germany. "The fundamental situation is still very weak."
There's no floor trading on the exchange today because of the Labor Day holiday in the U.S., which marks the end of the so-called summer driving season.
Brent crude oil for October settlement rose as much as 1.8 per cent to $68.05 on the London-based ICE Futures Europe exchange. The contract traded at $67.72 a barrel at 2:52 p.m. local time. Brent last week dropped 8.2 per cent in the biggest weekly decline this year.
OPEC helped prop up oil after it hit a five-year low in December 2008. Prices are up 53 per cent this year, which will probably persuade the group to stick to the target at this week's meeting.
Kuwait Oil Minister Sheikh Ahmed Al-Sabah said his country expects no further cuts in output quotas. Kuwait forecasts oil prices will be $60 to $75 a barrel for the rest of this year, the minister told reporters today in Kuwait City.
Reducing shipments beyond last year's record cutbacks would endanger the global economic recovery, OPEC President Jose Maria Botelho de Vasconcelos said last week. Oil rose to $75 a barrel August 25, the price Saudi Arabia's King Abdullah has said is fair for consumers and producers.
OPEC, which pumps about 40 per cent of the world's oil, cut quotas by 4.2 million barrels a day between September and December to prevent a glut amid the global recession.
The 11 members bound by targets, all except Iraq, have complied with those reductions by about 70 per cent. They supplied 26.055 million barrels a day last month, 1.21 million barrels a day above targets, according to Bloomberg estimates.
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