Crude oil futures gain on dollar weakness

Forex Pros – Crude oil futures were up for a second day on Tuesday, as a weaker U.S. dollar supported prices while investors took advantage of weakness in recent sessions that drove prices to a four-month low.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at USD94.87 a barrel during European morning trade, jumping 1.15%.      

It earlier rose as much as 1.36% to USD95.09 a barrel, the highest price since June 17.

The euro climbed to a four-day high against the U.S. dollar, after Klaus Regling, head of the European Financial Stability Facility said Monday that the effective lending capacity of the bailout fund would be raised to EUR 780 billion from EUR440 billion.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.3% to trade at 75.22.

Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for holders of other currencies.

Global financial service provider Barclays said in a report late Monday that the recent decline in prices had “nothing to do with fundamentals” and that prices were being driven by “sovereign debt concerns and movements in the euro/dollar”. 

The lender said that it expected prices to move higher in the second half of the year, citing “sharp reductions in the prospects for non-OPEC supply and resilient global demand”.

Meanwhile, crude prices were also boosted as investors returned to the market after prices slumped to a four-month low in the previous session, while short-covering ahead of the expiration of the July contract also lent support.

The crude July contract is due to expire at the end of trading on Thursday.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery rose 0.9% to trade at USD112.73 a barrel, up USD17.86 on its U.S. counterpart.

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