Oil trading up around 3 percent on stronger US dollar

Oil prices are trading up around 3 percent at close on Wednesday as the US Dollar Index surged upward, together with a US government report showed weekly crude stockpiles fell more than expected.

US Light crude oil futures for January delivery advanced $1.97 to settle at $72.66 a barrel on the NYMEX. The US dollar strengthened broadly against other major currencies including the Euro.

“Crude isn’t trading on fundamentals,” said Ken Hasegawa, commodity derivative sales manager at Newedge Japan in Tokyo. “Oil is lower mainly due to technical reasons because of currencies.”

The Energy Information Administration said crude inventories fell by 3.7m barrels last week, bigger than the 2m barrel drop pencilled in by analysts. Oil prices came off the day’s highs however as the Federal Reserve kept interest rates as zero and said that stimulus measures would be brought to an end early next year.

Oil prices snapped a nine day losing streak on Tuesday as oil cartel OPEC lifted its global demand forecast for 2010 by 70,000 barrels a day to 85.13m barrels because of increased demand from China and India.

Tags:  dollar index, oil trading, US dollar