Oil hovers above $77 as euro steadies after plunge - CBS News 8 - San Diego, CA News Station - KFMB Channel 8

Oil hovers above $77 as euro steadies after plunge

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A man looks at an electric stock board in downtown Tokyo, Monday, April 26, 2010. (AP Photo/Shizuo Kambayashi) A man looks at an electric stock board in downtown Tokyo, Monday, April 26, 2010. (AP Photo/Shizuo Kambayashi)

Oil prices rose to near $78 a barrel Friday, halting an 11 percent sell-off this week as the euro recovered against the dollar and world stock markets steadied.

By early afternoon in Europe, benchmark crude for June delivery was up 57 cents to $77.68 a barrel in electronic trading on the New York Mercantile Exchange. The June contract lost $2.86 to settle at $77.11 on Thursday.

Crude prices have fallen from an 18-month high of $87.15 that was hit Monday. That level was reached as the dollar surged against the euro amid investor concern a $142 billion bailout package for Greece won't be enough to keep the debt crisis from spreading to other European countries.

Commodities priced in dollars, such as oil, become more expensive for investors holding euros as the U.S. currency strengthens.

"The debt crisis in the eurozone is obviously a reason for many investors to critically question the price level of crude oil," said a report from Commerzbank in Frankfurt. "Prices well above $80 have lacked any fundamental basis for some time now. The scale of the price slump shows just how much the price level was previously driven up by speculative investors."

The euro, which fell to a 14-month low of $1.2520 on Thursday, rose to $1.2761 on Friday.

"Fear of contagion to Spain and Portugal is being taken very seriously," Sander Capital Advisors said in a report. "If the euro continues to trade lower it will put additional pressure on oil."

Plunging global stock markets have also weighed on oil prices. Crude traders often look to equities as a barometer of overall investor sentiment, and the Dow Jones industrial average fell 3.2 percent Thursday.

All major Asian and European stock indexes were down Friday.

Some analysts expect oil prices to rebound as a global economic recovery boosts crude demand. Investors will be eyeing the Labor Department's April employment report, due out later Friday, for signs the U.S. economy is growing.

"We view the fall in prices as transitory, as there has been hardly been any deterioration in oil market fundamentals," Barclays Capital said in a report.

Analysts said this week's government report on oil inventories showed that despite any effects of the leaking oil well in the Gulf of Mexico, oil stocks in the region continued to increase, with the Gulf Coast reporting a "huge" build of 2.52 million barrels.

"Total stocks in the region remain at an 8.5 percent surplus to the 2004-08 (period)," said a report from U.S. energy consultancy Cameron Hanover. "The implication here is that the Deepwater Horizon spill is having no tangible impact on imports and even if it does, stock levels can comfortably absorb any knock-on shocks."

In other Nymex trading in June contracts, heating oil rose 1.81 cents to $2.1318 a gallon, and gasoline advanced 2.97 cents to $2.1860 a gallon. Natural gas gained 3.3 cents to $3.962 per 1,000 cubic feet.

In London, Brent crude was up 41 cents to $80.24 on the ICE futures exchange.


Associated Press writer Alex Kennedy in Singapore contributed to this report.


Copyright 2010 The Associated Press.

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