Oil prices trading above $72 on inventory drop, weak dollar

Crude oil prices rose for the second session straight Wednesday after a government report showed crude inventories fell more than expected, and the dollar continued to weaken. Crude for October delivery rose 2.23%, or traded up $1.58, and settled at $72.51 a barrel, the highest since Aug. 28.

A softer dollar has been giving crude prices a boost lately. The greenback hit a seven-month low against the yen and a nine-month low against the euro on Wednesday. Oil, like other commodities, is priced in dollars and a weaker greenback typically supports prices.

“The only reason prices are rallying today is again because of the weakness of the dollar and the strength of the stock market,” said James Cordier, president of Liberty Trading Group, adding that inflationary fears could push crude prices higher in upcoming sessions.

Stocks rose Wednesday, building on Tuesday’s gains, when the three major indexes hit new 2009 highs. The markets have now gained for seven out of the last eight sessions, as investors become more confident that a recovery is underway.

“The market continues to push investors to buy crude oil with the idea that the economy is about to improve,” Cordier said. “All eyes will be on the stock market to see if it will continue climbing, and oil will tag along.”

Tags:  dollar, oil prices