Oil hovers below $79 after 3 day slide

I / Singapore October 27, 2009, 12:07 IST

Oil prices lingered below $79 a barrel today in Asia after three days of losses as investors eyed a volatile US dollar.

Benchmark crude for December delivery rose 12 cents to $78.80 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

The contract fell $1.82 to settle at $78.68 yesterday.

Crude jumped to a 12-month high at $82 a barrel last week as the dollar weakened amid concerns that massive global stimulus spending will eventually spark inflation.Since oil is priced in dollars, a drop in the US currency makes it cheaper to international investors.

The euro touched a 14-month high of $1.5061 on Monday before closing at $1.4861. The euro strengthened slightly to $1.4882 in early Asian trading while the dollar fell to 92.06 yen from 92.21.

"A weakening dollar could put significant pressure on dollar-denominated oil prices in the months ahead," Bank of America Merrill Lynch said in a report.

"The combination of surging money supply, a rapidly weakening dollar and a cyclical improvement in oil demand could push oil prices above $100."

Some economists, such as Jorg Zeuner of Liechtenstein- based VP Bank, expect the dollar and oil to stabilise over the next three to six months as inflation fears ease.