Oil near $81 on boost by weaker dollar

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FILE - In this Oct. 19, 2009 file photo, Russ Conde, of Kingston, N.H., fills his truck with gas at a fueling station, in Waltham, Mass. (AP Photo/Steven Senne, file)

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The weakening U.S. dollar helped oil prices rise to near $81 a barrel Monday as traders looked to company earnings and U.S. economic data for justification of last week's jump to a 2009 high.

By mid-afternoon in Europe, benchmark crude for December delivery was up 38 cents to $80.88 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 69 cents a barrel to settle at $80.50 on Friday.

Crude prices, which rose to $82 last week, initially fell as low as $79.57 on Monday on investor doubts about the strength of the global economic recovery. As the dollar weakened, however, oil recovered because commodities are priced in dollars and a drop in the U.S. currency makes them cheaper to international investors.

The euro was up to $1.5023 on Monday from $1.4998 on Friday while the dollar fell to 92.04 Japanese yen from 92.13 yen.

"If the oil price continues to rise in the next week or two, there is a danger that economic recovery will be strangled at birth and these fears will give rise to talk that OPEC must act to put more oil into the market to cap prices," said a report from Britain's KBC Market Services. "Today's $80 (per barrel) price is not firmly grounded because the fundamentals for both the economy and the oil market remain weak."

Traders will be looking to a slew of corporate results and economic indicators for guidance this week. The Commerce Department is scheduled to announce third-quarter gross domestic product, with reports on housing prices, new home sales, consumer confidence and durable goods orders also due during the week.

Third-quarter earnings from Kellogg Co., Procter&Gamble Co. and Visa Inc. will provide insight into consumer spending while ConocoPhillips, Exxon Mobil Corp., Aetna Inc. and MetLife Inc. are also due to announce results.

"It is still sentiment, not fundamentals, that is driving oil prices and therefore a downward correction back toward $70 per barrel would appear to be on the table," noted JBC Energy in Vienna. "Once again it appears that investors are flooding money into oil markets to try and make a quick buck, despite many having had their fingers burnt last year when oil prices fell from their high of $147 to below $34 per barrel."

A new cease-fire agreement between the Nigerian government and rebels in the oil-rich Niger Delta region was helping to keep a ceiling on oil prices.

"Last week's announcement by the Nigerian government that it is willing to give 10 percent of the country's oil wealth to the residents of the Niger Delta appears to paying dividends," said JBC Energy in Vienna.

Unrest in the region had cut Nigeria's oil production by about a million barrels a day, allowing Angola to overtake it as Africa's top oil producer.

The militants had been attacking oil installations, kidnapping oil company employees and fighting government troops since January 2006. They have said they want the federal government to send more oil-industry funds to the southern region that remains poor despite five decades of oil production.

In other Nymex trading, heating oil rose 1.89 cents to $2.0945 a gallon. Gasoline for November delivery gained 3.27 cents to $2.0765 a gallon. Natural gas for November delivery slumped 25.9 cents to $4.528 per 1,000 cubic feet.

In London, Brent crude for December delivery rose 88 cents to $79.80 on the ICE Futures exchange.

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Associated Press writers Alex Kennedy in Singapore and Bashir Adigun in Abuja, Nigeria, contributed to this report.

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