Oil prices rise as dollar weakens

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Crude oil prices rose on Tuesday, extending gains won a day earlier, as the dollar weakened before the US Federal Reserve was due to announce its latest monetary policy decisions.

Brent North Sea crude for delivery in January climbed 27 cents to 91.46 dollars a barrel in London trade.

New York's main contract, light sweet crude for January, advanced 18 cents to 88.79 dollars.

"The softer US dollar seems supportive for the oil market, as the euro hit a three-week high against the US dollar and the yen in light trading conditions early Tuesday," said Myrto Sokou, an analyst at Sucden brokers in London.

The dollar sank after Moody's ratings agency warned overnight that US tax-break proposals could damage the outlook and finances for the American economy.

A weaker dollar makes oil cheaper for buyers holding rival currencies, pushing up demand.

Later on Tuesday, at 1915 GMT, the US Federal Reserve's Federal Open Market Committee (FOMC) was widely expected to maintain interest rates at historically-low near-zero levels.

The United States is the world's biggest consumer of oil.

Oil prices had already risen on Monday, helped by OPEC's decision to maintain the cartel's output levels, a falling dollar and a cold snap in Europe, dealers said.

The Organization of Petroleum Exporting Countries (OPEC) decided Saturday to hold its production quotas at a meeting in Ecuador's capital Quito, stressing looming risks to the fragile global economic recovery.

The 12-nation cartel said the economic growth that had pushed oil to two-year highs above 92 dollars a barrel last week was likely to slow next year.

© 2010 AFP

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