LONDON, (Reuters) – Oil rose above $74 a barrel on Tuesday after a 2 percent fall the previous day, supported by a weaker dollar, but the slow recovery in energy demand and ample supplies limited gains.
A weaker dollar makes dollar-denominated commodities, such as oil, more expensive for holders of other currencies and tends to pressure oil prices.
Senior Federal Reserve officials curbed speculation of a quick rise in U.S. rates, comments that weighed on the dollar. “The U.S. dollar has eased in the past few hours and that is also a factor that has helped oil prices slightly,” said David Moore, Commonwealth Bank’s commodities strategist.
U.S. crude for January delivery was up 35 cents to $74.28 a barrel by 0940 GMT, after settling $1.54 lower on Monday. Brent crude rose 53 cents to $76.96.
Oil touched its lowest level since November 27 earlier in the session, when it reached an intra-day low of $72.39. Until Monday, the market had traded in a range of about $75-$80 a barrel since mid-October.
Investors in oil have looked to economic indicators and to other financial markets, such as equities, this year for signs of a recovery that would support oil demand. “The economy is still mixed,” said Moore. “While China is strong, the U.S. is unlikely to see a smooth recovery and there will be periods of reversals. But the anticipation of a recovery will be supportive in the coming year.”
Oil has rallied to a high for the year of $82 a barrel reached in October from below $33 in December 2008, even though fundamentals of supply, demand and inventories are bearish in the view of many analysts.
Reports this week are expected to show U.S. crude oil and gasoline inventories rose, adding to ample supplies. Crude stocks are expected to rise by 500,000 barrels and stocks of gasoline by 1.4 million barrels.
The American Petroleum Institute will release its supply report on Tuesday at 4:30 p.m. EST (2130 GMT). The U.S. Energy Information Administration issues its snapshot on Wednesday.