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NEW YORK - Oil prices rose $2 to above $89 a barrel on Thursday following Opec's output rollover and as weakness in the US dollar propped up commodities.
Opec agreed on Wednesday to keep output restrictions in place, shrugging off calls from consumer nations for more supply to stem sliding stockpiles ahead of winter.
Algeria's oil minister on Thursday added the group could consider cutting back production if the US economy falls into recession. ID:nL06665113
US crude futures CLc1 rose $2.00 at $89.49 a barrel by 1849 GMT after dipping as low as $85.82 earlier in the session, a level not seen since Oct. 24. London Brent LCOc1 gained 94 cents to trade at $89.43 a barrel.
The rebound stemmed a sharp sell-off since the peak near $100 a barrel in late November propelled by growing uncertainty over the health of the US economy.
Oil's turnaround came as the US dollar weakened against the euro after the European Central Bank left interest rates on hold but President Jean-Claude Trichet warned of "strong upward pressure" on inflation. The Bank of England cut rates by 25 basis points.
"It's the dollar's weakness that has pushed prices higher here," said Tom Bentz of BNP Paribas Commodity Futures.
The falling dollar has supported commodities denominated in the currency this year, raising the purchasing power of non-dollar nations and reducing the relative value of commodity revenues into producer countries.
The weakening greenback, an influx of speculative cash and concerns over consumer nation inventories going into the Northern Hemisphere winter pushed oil up 40 per cent from August to nearly $100 a barrel in late November.
Worries that economic problems in top oil consumer the United States could cut energy demand growth knocked oil 12 per cent off a record $99.29 a barrel struck on Nov. 21.
Concerns about the US economy dragged oil lower on Wednesday, after Opec rejected consumers' requests to raise production and kept output flat at a meeting in Abu Dhabi.
The decision came as government data showed an 8 million barrel drop in US crude stockpiles last week to their lowest level in more than two years.
Stocks of distillate fuels, including heating oil, rose by 1.4 million barrels, however, and petrol inventories rose 4 million barrels.
A report earlier this week that contradicted the Bush administration's assertion that Iran was intent on developing a nuclear bomb also eased concerns a standoff with the West could cut supplies from the Opec nation. (Reporting by Matthew Robinson and Richard Valdmanis in New York, Santosh Menon in London; Luke Pachymuthu in Singapore, editing by Matthew Lewis)
- REUTERS
