As dollar slides, crude oil rises past $78

Associated Press / December 2, 2009

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Oil prices climbed yesterday as the dollar weakened and new figures showed energy demand for crude may be growing in China.

Benchmark crude for January delivery rose $1.09 to settle at $78.37 on the New York Mercantile Exchange.

The dollar grew weaker against the euro, which fetched more than $1.50 yesterday after the European Union said unemployment held steady at 9.8 percent in October. Unemployment in the United States is already above 10 percent.

Since oil is largely bought and sold in dollars, investors holding stronger currencies can buy more crude for less.

Oil also got support from a Chinese industry group that said manufacturing activity expanded in November for a ninth straight month along with rising stock markets around the world.

Manufacturing activity also grew in the United States for the fourth straight month, but the recovery is more choppy, according to the Institute for Supply Management, a trade group. Growth was slower in the United States than it was last month. That also plays a significant role in domestic energy demand.

“There’s so many factors at play today,’’ PFGBest analyst Phil Flynn said.

Gasoline and heating oil also rose yesterday. Natural gas was flat after tumbling 7 percent Monday. Jim Ritterbusch of Ritterbusch and Associates said gas prices have been hurt by new forecasts that show temperatures should be milder than earlier outlooks for the first part of December.