Oil prices trading higher near $78 on lower US dollar

Crude oil prices rose in early trading on Tuesday, closing back near $78 as the US dollar weakened and investors took the view a drop below $79 a barrel made futures including crude oil futures attractive to buy.

Oil prices snapped its longest decline since December as the US dollar fell to a four week low against the yen, increasing the appeal of commodities as an alternative investment. Crude also gained on a report yesterday China’s imports may rise 15 percent this year as the second-largest energy consumer starts building the second phase of its strategic oil reserves.

“On the upside is improved economic headlines from US and China,” said Gordon Kwan, the head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong. “Oil will be trading in the range between $79 to $83, I don’t see it breaking through until we have better visibility on how strong the economic recovery is going to be.”

Crude oil for February delivery climbed as much as 68 cents, or 0.9 percent, to $78.68 a barrel in electronic trading on the NYMEX. Oil futures dropped 5.7 percent last week, the first weekly decline in five, after US fuel supplies rose.

February futures, which settled at $78 a barrel January 15th, expire tomorrow. The more widely traded March contract gained as much as 66 cents, or 0.8 percent, to $79.03.

“Given the outlook for demand and given what’s happened with supply there is always going to be investors willing to buy in around the mid- to high-$70s,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne.

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