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Oil prices up on hurricane threat, dollar weakness

by Staff Writers
New York (AFP) Nov 9, 2009
Oil prices rebounded Monday on dollar weakness and concerns over Hurricane Ida's potential damage to petroleum installations in the Gulf of Mexico despite being downgraded to a tropical storm.

New York's main contract, light sweet crude for delivery in December, jumped 2.00 dollars to 79.43 dollars a barrel.

In London, Brent North Sea crude for December rose 1.90 dollars to 77.77 dollars a barrel.

Both contracts had dropped by more than two dollars each Friday after official data showed US unemployment rate jumping to 10.2 percent in October, stoking fears it could dampen economic recovery and energy demand.

The United States is the world's biggest energy user and is seen as a crucial driver of oil demand, which has been depressed by the global economic slump.

Ida, which was downgraded to a category one storm early Monday, took aim at the United States and oil fields in the Gulf of Mexico after causing flooding and landslides that killed 124 people in El Salvador.

"The category one hurricane that's on its way to the US is probably a big factor but so is the (US) currency (weakness), said Bart Melek of BMO Capital Markets.

A weaker dollar makes oil and other dollar-priced commodities cheaper for those using other currencies, boosting demand and therefore prices.

"At this point it seem unlikely that there will be any major damage to the facilities in the Gulf yet the market has to be cautious," said analyst Phil Flynn of PFG Best.

"It is hard to determine how much of the rally in oil is Ida related and how much is it is dollar related," he said.

Meanwhile top oil-producing countries fear that the UN climate change conference in Copenhagen next month could levy new taxes on the oil and gas industries, Algerian Energy Minister Chakib Khelil was quoted as saying on Sunday.

Khelil told the Algerian APS news agency that the Organization of Petroleum Exporting Countries (OPEC), a 13-member cartel of oil-rich nations, are worried any new taxes agreed in the Danish capital could have "a negative impact on their economies."

Khelil said OPEC, of which Algeria is a member, would work together to strike a common position ahead of the December conference "in order to protect their interests."

Jose Maria Botelho de Vasconcelos, Angola's oil minister and current OPEC president, vowed last month that the world's major oil producers would resist any move that would punish their industries.

In Copenhagen, world leaders will try to seal a new accord to fight climate change after the Kyoto Protocol requirements expire in 2012.


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