Oil prices climb on weak dollar
Global oil prices advanced on Monday as traders took their cue from the weaker dollar, but the market trimmed earlier gains as exit polls showed no clear winner from Italy's general election, analysts said.
Brent North Sea crude for delivery in April rose 52 cents to $114.62 a barrel in late afternoon deals in London, having earlier rallied as high as $115.87.
New York's main contract, West Texas Intermediate (WTI) or light sweet crude for April, gained ten cents to $93.23 per barrel. It had earlier jumped to $94.46.
"A weak US dollar initially saw commodity prices push higher with Brent and WTI oil prices quite a bit higher on the back of higher equity markets," said CMC Markets analyst Michael Hewson.
"The afternoon equity market sell-off and rebound in the US dollar soon put paid to most of those gains."
European stock markets rode an Italian election rollercoaster on Monday, rising as exit polls initially tipped a centre-left victory but then dipping as it emerged a coalition may be needed.
And in foreign exchange deals, the European single currency briefly soared above $1.33 on the prospects of a clear win by Italy's centre-left, but then fell back to $1.3197. That was still up marginally from $1.3189 on Friday.
A struggling greenback makes dollar-priced oil cheaper for buyers using stronger currencies, stimulating demand and sparking higher crude price levels.
"Sentiment turned after forecasts from early vote count in Italy's election showed Silvio Berlusconi was ahead in the Senate," said analyst Fawad Razaqzada at GFT Markets.
"This caused the euro to drop sharply, causing the US dollar and other safe-haven assets to rise."
Billionaire and three-time prime minister Berlusconi, 76, had waged a populist campaign, blaming the Germans for Italy's economic woes and promising to refund an unpopular property tax to Italians.
Meanwhile the centre-left led by Pier Luigi Bersani had pledged to continue with budget discipline if he won the election, to the delight of financial markets.
The oil market had fallen in Asian deals on Monday after news of a slowdown in manufacturing activity in China, which is the biggest global energy consumer.
China's manufacturing growth hit a four-month low in February but remained positive, British banking giant HSBC said Monday, but also noted that the world's second-biggest economy was still recovering slowly.
The bank's preliminary purchasing managers' index (PMI) stood at 50.4 for the month, down from a final 52.3 in January, it said in a statement. The figure was seasonally adjusted to take account of the Lunar New Year holiday that fell in the middle of the month.
A reading above 50 indicates expansion and it was the fourth consecutive month of growth, after 12 months of contraction.
Last week, crude futures had dived on worries of an end to the US stimulus programme amid global economic strains and weak demand for oil in top consumer nation the United States, traders said.
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