Oil prices rise as dollar drops
Oil prices rose on Monday as the dollar hit fresh 15-year lows against the yen after G20 economies agreed to avoid potentially destabilising competitive currency devaluations.
A softer US currency makes dollar-denominated oil cheaper, perking up demand and leading to higher prices.
New York's main contract, light sweet crude for delivery in December, rose 35 cents to 82.04 dollars a barrel.
Brent North Sea crude for December delivery gained 10 cents to 83.06 dollars in midday London trade.
"Oil is heading up as a direct result of the US dollar coming down against the euro and the yen," said Victor Shum, an analyst with energy consultancy Purvin and Gertz.
G20 finance ministers and central bank governors meeting over the weekend in the South Korean city of Gyeongju agreed on a framework to tackle large current account surpluses and reduce global trade imbalances, but shied away from specific targets.
"The US dollar is weakening because of the agreement out of the G20 finance ministers meeting, namely that there's not going to be competitive currency devaluations," Singapore-based Shum told AFP.
"The market interpreted the agreement as a go-ahead signal to the United States to do a second round of quantitative easing, so the dollar is heading down."
The US Federal Reserve is expected to flood its banking system with money by buying securities as part of efforts to stimulate the economy, a move that would put downward pressure on the dollar.
Shum said a hurricane in the Atlantic Ocean is also helping keep prices higher on fears it could threaten crude oil facilities in the US Gulf Coast.
© 2010 AFP