Oil hovers near $71 amid weakening US dollar

Oil prices hovered near $71 a barrel today in Asia after a weakening US dollar sent crude soaring overnight.

Benchmark crude for October delivery was up 2 cents at $71.12 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

on Tuesday, the contract gained $3.08 to settle at $71.10 as the dollar fell to a low for the year against the euro and gold prices surpassed $1,000 an ounce for the first time since February.

Some investors buy oil, gold and other commodities as a hedge against a weakening dollar and inflation.

The euro was steady at $1.4488 in Asian trading while the dollar edged up to 92.32 yen.

"People are selling dollars for higher-yielding currencies, and that's driving oil higher," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore.

"Keep an eye on the dollar and the $74 level," he said.
"If oil breaks that, it could shoot to $80 or $85 in the short-term."

Investors will also be looking to the Organisation of Petroleum Exporting Countries, which produces about 40 per cent of the world's output, as it mulls production targets at a meeting later in the day.