SINGAPORE: Oil prices fell slightly to near US$71 a barrel Tuesday in Asia after signs of economic recovery in the U.S. fueled stock and crude rallies.
Benchmark crude for September delivery was down 48 cents to $71.10 a barrel by midday Singapore time in electronic trading on the New York Mercantile Exchange.
On Monday, the contract rose $2.13 to settle at $71.58.
Traders have brushed off evidence of weak crude demand and rising inventory levels, instead focusing on improving macroeconomic indicators.
A report Monday from the Institute for Supply Management, a trade group of purchasing executives, said U.S. manufacturing activity should increase next month for the first time since January 2008. Also, the Commerce Department said construction spending rose in June.
The positive economic news has emboldened investors to bid up stocks and oil.
The Dow Jones industrial average rose 1.3 percent Monday and most Asian indexes gained in early trading Tuesday.
"With the economy seemingly improving each week, oil has felt pressure to go higher," said Michael Sander, an advisor at Sander Capital in Seattle.
"As far as fundamentals go, oil still has very high inventory levels and weak consumer demand, but those just don't seem to matter."
A report last week showing U.S. crude inventories jumped the previous week suggested demand remains sluggish, and sent prices below $63 a barrel.
Since then, oil has been on a tear as investors anticipate an improving economy will boost demand and whittle away supplies.
"Improving demand amid continued supply tightness should accelerate the pace of erosion of the inventory overhang, lending support to prices," Barclays Capital said in a report.
In other Nymex trading, gasoline for August delivery was steady at $2.06 a gallon and heating oil held at $1.87.
Natural gas for August delivery fell 8.8 cents to $3.94 per 1,000 cubic feet.
In London, Brent prices fell 36 cents to $73.19 a barrel on the ICE Futures exchange. - AP
Oil prices up sharply on weak US$, manufacturing strength
COLUMBUS, Ohio: Oil and natural gas prices rose sharply Monday on the weakening dollar and on new signs of life from manufacturers that suggest the recession may be loosening its grip.
Benchmark crude for September delivery rose 3 percent, or $2.13 to settle at $71.58 a barrel on the New York Mercantile Exchange.
It was the third straight day of substantial increases on the energy futures markets and the first time in a month that crude traded above $70.
Natural gas, a major source of power generation, spiked by more than 9 percent on a day when both China and the United States reported stronger manufacturing activity.
Production from U.S. manufacturers jumped to its highest level in more than two years last month with new orders to restock businesses that had cleared inventories as the economy slumped.
The decline in manufacturing has been slowing since December and officials with the Institute for Supply Management, a trade group of purchasing executives, said Monday that signs of growth in the sector could emerge as early as next month.
Manufacturing in China expanded at its fastest clip in a year, according to a survey by Hong Kong brokerage CLSA Asia-Pacific Markets.
Still, crude has been rising for the past several weeks on the downward trend for the U.S. dollar.
The dollar index reached its lowest point since September against the euro on Monday.
Money floods into equities markets when the dollar falls because products like crude are priced in the U.S currency.
Oil can be used as a hedge against inflation and it also becomes cheaper when the dollar falls.
Still, energy experts believe the price of oil and natural gas may be higher than they should be right now.
A barrel of crude reached as high as $72.20 in midday trading, a price some believe will give way soon.
Oil prices seesawed last week before surging Thursday and Friday as investors bet that crude demand, which has been tepid this summer, will eventually pick up as the economy improves.
In other Nymex trading, gasoline for August delivery rose 5.67 cents to settle at $2.0693 a gallon and heating oil gained 3.88 cents to settle at $1.8713.
Natural gas for August delivery jumped 37.8 cents to settle at $4.031 per 1,000 cubic feet.
In London, Brent crude prices rose $1.85 to settle at $73.55 a barrel on the ICE Futures exchange. - AP
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