March 29, 2010 / 3:06 AM / 7 years ago

Oil rises near 3 percent on weak dollar, book-squaring

<p>Drivers load gasoline at a local gas-station during a blackout in Santiago, March 14, 2010. REUTERS/Ivan Alvarado</p>

NEW YORK (Reuters) - Oil prices rose almost 3 percent on Monday, lifted by a weaker dollar, renewed economic optimism and end-of-quarter book-squaring.

The dollar index .DXY fell against a basket of currencies, helping to boost commodity prices, including oil.

Trading sources reported end-of-quarter and end-of-month buying ahead of the Easter holiday weekend and several said there could be some lift to oil from concerns about a suicide bombing in the Moscow metro.

“The explosion in Russia is a culprit along with the weak dollar and there is end-of-quarter book-squaring and window-dressing on Wall Street,” said Stephen Schork, president at the Schork Group in Villanova, Pennsylvania.

U.S. crude for May delivery rose $2.17, or 2.71 percent, to settle at $82.17 a barrel, ending a three-session losing streak and trading as high as $82.78, the highest front-month crude price since March 17.

London Brent crude gained $1.88 to settle at $81.17.

The euro strengthened against the dollar as debt-stricken Greece sold seven-year bonds and after last week’s euro zone agreement on emergency financial aid for Greece.

Strong U.S. and European economic data and robust Asian indicators helped to lift equity markets. Euro zone economic sentiment increased more than expected in March.

U.S. consumer spending rose as expected in February for a fifth straight month, but stagnant incomes pushed savings to their lowest level since October 2008.

U.S. stocks closed higher on Monday as Greece launched its sovereign bond issue and with energy shares helping fuel the rise.

“As is often the case when prices spike by more than a couple of percentage points, several factors combined to ignite an influx of speculative capital into the long side,” Jim Ritterbusch, president at Ritterbusch & Associates, said in a note.

Markets were eyeing Friday’s U.S. jobs report, with economists forecasting the economy created about 190,000 jobs in March.

ECONOMIC SENTIMENT

China’s annual economic growth will reach 12 percent this quarter, a government researcher said, as economists raised growth forecasts for the world’s second-largest fuel user after strong industrial output growth last month.

Japanese retail sales jumped the most in 13 years in the year to February due to the lingering effects of government stimulus, while South Korea’s current account swung back to a surplus in February on brisk exports.

Having traded intraday above $80 for the past 27 trading sessions, some traders said oil prices appear to be ready for a breakout from current levels.

However, with crude oil demand fundamentals continuing to clash with the positive macroeconomic data, analysts said prices could struggle to break out above the $84 mark -- with the U.S. crude oil 2010 peak from January at $83.95 a barrel.

Oil prices could stay in the $70 to $80 range over the next decade, according to an OPEC report released ahead of a major oil conference this week.

Saudi Arabia wants to keep prices in the $70 to $80 range, and most other OPEC members are comfortable with this level, a person familiar with Saudi policy said Monday.

Top energy officials and oil company executives from 64 countries are meeting in Cancun, Mexico, this week for the biannual International Energy Forum.

Additional reporting by Gene Ramos in New York, Joe Brock in London and Fayen Wong in Perth; Editing by Lisa Shumaker

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