Brent oil prices rally, trading back above $70

London’s Brent North Sea crude oil prices for November climbed $1.67 to $70.36 a barrel, oil prices bounced after the European single currency spiked to a one year high above $1.48 on Tuesday as many investors sold safe haven assets such as the greenback on the back of growing economic optimism, dealers said.

Since oil is traded in the US currency, a weaker dollar makes the commodity more attractive to holders of stronger units, leading to greater demand and pushing prices higher. Market analysts said oil prices were maintaining a trading range that had persisted since the middle of the year with investors waiting for more direction from US petroleum inventory reports due Wednesday.

“The market’s current divide falls between those holding a view that prices are capped until further evidence of sustainable economic growth appears, and those who believe that oil remains undervalued while infrastructure investment remains constrained, geopolitical threats abound and financial assets continue to be uncertain,” said analyst Mike Fitzpatrick of MF Global.

Phil Flynn of PFG Best Research said oil prices also got a boost Tuesday from reports about increasing Chinese oil imports. It is “giving oil bulls hope that demand in China is not as bad as feared,” he said.

“The truth is that China’s oil demand is largely dependent on the strength of the dollar. The weak dollar has encouraged China to import more oil than they need,” he added.

Tags:  brent oil prices, trading