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Oil back above $71 as euro bounces from 4-year low
Oil back above $71 in Europe as euro rebounds from 4-year low, European equities rise


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FILE - In this June 9, 2009 file photo, a Chevron customer pumps gas at a dealership in South San Francisco, Calif. Many analysts who predicted that retail gasoline prices would top $3 per gallon for a short time this summer, 2010, now are looking for prices to move lower or at least stabilize heading into the summer driver season. (AP Photo/Paul Sakuma, file)
Pablo Gorondi, Associated Press Writer, On Monday May 17, 2010, 7:55 am
Oil prices temporarily sank below $70 a barrel Monday as the dollar rose to a four-year high against the euro, but later recovered along with Europe's stock markets and its shared currency.

By early afternoon in Europe, benchmark crude for June delivery was up 4 cents to $71.65 a barrel in electronic trading on the New York Mercantile Exchange. The June contract lost $2.79, almost 4 percent, to settle at $71.61 on Friday.

Earlier in Monday's session, crude fell as low as $69.82, the lowest since $69.59 on Feb. 5, as the U.S. dollar gained against the beleaguered euro.

The Nymex contract "has dipped below the $70 a barrel mark this morning for the first time since early February," noted a report from Commerzbank in Frankfurt. "Like the price rally then, the price slump now has no visible fundamental basis, but is essentially due to a change of mood on financial markets."

Oil, which is priced in dollars, becomes more expensive to investors holding other currencies when the dollar advances.

The euro was still down to $1.2339 on Monday from $1.2352 on Friday, but up from its four year-low of $1.2237, while the British pound slid to $1.4443 from $1.4560.

Although Asian stock markets plunged Monday, most European indexes were up slightly and oil investors often look to equities as a sign of overall investor confidence.

While there was concern among investors that Europe's economy will wither amid a debt crisis and fiscal austerity measures, some analysts said the European Central Bank was letting the euro slide to help lift European exports and would wait to intervene.

"It would be a mistake to assume that a weaker euro necessarily means a slowing of European (and global) growth, nor should we conclude that a slump in the euro will act as a prolonged downward drag on commodity prices, the current relationship notwithstanding," said Edward Meir, senior commodity analyst at MF Global in New York. "Indeed ... we could see commodities decouple from the euro altogether, and start responding more to global macro readings."

As an example, Meir pointed to strong figures in U.S. April retail sales and industrial production, which normally would be seen as bullish, but which were mostly overlooked due to "the bearish undertow that engulfed most markets."

In other Nymex trading in June contracts, heating oil rose 0.21 cent to $2.0627 a gallon, and gasoline gained 0.33 cents to $2.1341 a gallon. Natural gas was up 6.2 cents to $4.374 per 1,000 cubic feet.

In London, Brent crude advanced 3 cents to $77.96 on the ICE futures exchange.

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