Oil prices climbed Tuesday as the dollar weakened and new figures showed energy demand for crude may be growing in China.
Benchmark crude for January delivery rose $1.71 to US$78.99 on the New York Mercantile Exchange.
The dollar grew weaker against the euro, which fetched more than $1.50 Tuesday after the European Union said unemployment held steady at 9.8 per cent in October. Unemployment in the U.S. is already above 10 per cent.
Since oil is largely bought and sold in dollars, investors holding stronger currencies can buy more crude for less.
Oil also got support from a Chinese industry group that said manufacturing activity expanded in November for a ninth straight month along with rising stock markets around the world.
Manufacturing activity also grew in the U.S. for the fourth straight month, but the recovery is more choppy, according to the Institute for Supply Management, a trade group. Growth was slower in the U.S. than it was last month. That also plays a significant role in domestic energy demand.
“There’s so many factors at play today,” PFGBest analyst Phil Flynn said.
Gasoline and heating oil also rose Tuesday. Natural gas was flat after tumbling seven per cent Monday. Jim Ritterbusch of Ritterbusch and Associates said gas prices have been hurt by new forecasts that show temperatures should be milder than earlier outlooks for the first part of December.
Oil climbed $1.23 to $77.28 Monday on news that Iran had detained five British sailors, which could increase the chance of a standoff between a major crude exporter and Western powers.
Iran seized a racing yacht in the Persian Gulf last week, although the British government did not disclose the incident until now. Still, most international incidents in recent months have failed to boost energy prices, which is good for consumers given the global economic downturn.
Crude prices fell only briefly last week on fears that Dubai would default on $59 billion in debt. News that Iran planned to build an additional 10 uranium enrichment plants, as well as the hijacking of a U.S. bound oil tanker from Saudi Arabia, were largely ignored by traders this week.
Most energy experts believe the weekly petroleum supply report from the government, due out Wednesday, will show crude supplies fell slightly, while gasoline in storage rose again.
Expectations of higher U.S. demand have rarely met reality recently. Demand for gasoline for the week ended Friday was flat with the depressed levels of a year ago and is up just 0.6 per cent for the year, according to the weekly MasterCard SpendingPulse report.
MasterCard’s report is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check.
Prices at the pump have been relatively flat or falling, and dropped 0.2 cent overnight to $2.627 a gallon, according to AAA, Wright Express and Oil Price Information Services. Prices are 6.6 cents below where they were a month ago.
A gallon of gasoline costs 80.7 cents more than it did a year ago, when prices plunged due to the crisis on Wall Street.
In other Nymex trading in January contracts, heating oil rose 4.51 cents to $2.0930 and gasoline gained 4.97 cents at 2.0612. Natural gas lost 0.9 cent at $4.839 per 1,000 cubic feet.
In London, Brent crude for January delivery gained $1.28 at $79.75 on the ICE Futures exchange.