Oil approaches 69 dollars in Asia as euro rebounds

(SINGAPORE) - Oil prices turned higher in Asian trade Thursday, approaching 69 dollars a barrel, after the greenback fell against the euro, analysts said.

In afternoon trade, New York's main futures contract, light sweet crude for delivery in August, was up 14 cents to 68.81 dollars a barrel, reversing losses earlier in the day.

Brent North Sea crude for August delivery advanced 22 cents to 68.55 dollars a barrel.

The dollar's performance is a key factor in the oil market because a stronger greenback makes the dollar-priced commodity more expensive for holders of other units, dampening demand and leading to lower prices.

The US unit had a boost Wednesday after the policy-making Federal Open Market Committee of the US central bank reaffirmed its policy of keeping interest rates at near zero.

It extended its gains against the Japanese yen, rising to 96.19 yen in Tokyo afternoon trade Thursday, from 95.62 in New York late on Wednesday. But it fell against the euro, with the European unit up at 1.3962 dollars from 1.3926.

"It's really the currency movement that continues to be a driver of oil prices in the near term," said Victor Shum, a senior principal at energy consultancy Purvin and Gertz in Singapore.

Conflicting signals about the strength of a recovery for the global economy have led to volatile swings in oil prices recently, with some analysts saying they were recovering too fast despite weak demand.

Capital Economics said Thursday that world trade, which has been hard hit by the economic crisis, "may be close to stabilising... but there are few signs yet of a meaningful recovery."

The London-based research house said it now expects merchandise trade volumes "to fall by around 15 percent in 2009 as a whole, with only a partial rebound over the next two years."

Crude oil futures plunged from record peaks of more than 147 dollars in July 2008 to about 32 dollars in December as the economic downturn ravaged energy demand but the market has since clawed back ground on recovery hopes.

The market meanwhile also remained gripped by post-election violence in key crude producer Iran and rebel attacks on oil facilities in Nigeria.