Oil stays near $78 in Europe as traders weigh doubts about global demand against weaker dollar

Oil stays near $78 on demand doubts, weaker dollar

Oil prices hovered around $78 a barrel Monday as traders weighed doubts about global oil demand against a weaker U.S. dollar, which made crude cheaper for investors holding other currencies.

By midday in Europe, benchmark crude for February delivery was up 30 cents to $78.30 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract slid $1.39 to settle at $78. The price was down $4.75 for the week after declining for five straight days.

Earlier Monday, declines in most of the major Asian stock markets dampened investor sentiment and helped pushed crude prices as low as $77.07.

This followed Friday’s decline on Wall Street, where rising loan losses at JPMorgan Chase & Co. sparked concerns about profits at other big banks. Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co. are expected to post results this week.

“We see a downward pressure on oil. The corporate earnings results so far have not really indicated much revenue growth and that points to continued weakness in the U.S. economy,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Shum said the recent cold weather in the U.S. has failed to sharply reduce oil inventories and the frigid spell is now easing, which will detract from demand for oil.

Oil prices may slide further but Shum said bargain hunting is likely to stem the fall at the mid $70s level. If the bank earnings are strong, the mood could also turn around quickly, he said.

The euro and the British pound were both higher against the dollar, making crude priced in dollars cheaper for investors holding those currencies. The euro bought $1.4379 compared with $1.4358 late Friday in New York, while the British pound rose to $1.6338 from $1.6258.

Analysts also mentioned a dispute about taxes on oil shipments between Russia and Belarus as a factor which could affect the market.

“With Europe suffering from the winter cold, any sustained supply disruption could have an impact on prices,” said a report from Britain’s KBC Energy Economics. “A large chunk of EU crude supplies are transited through the country.”

In other Nymex trading in February contracts, heating oil rose 0.19 cent to $2.0479 a gallon and gasoline was up 0.88 cent at $2.0542 a gallon. Natural gas futures shed 4.8 cents to $5.643 per 1,000 cubic feet.

In London, Brent crude for March delivery gained 15 cents to $77.26 a barrel on the ICE Futures exchange.

Associated Press writer Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.