Oil prices climbed above $69 a barrel in Asia on Thursday, steadily extending gains as the dollar tumbled and stock markets in the region rallied after the U.S. Federal Reserve cut interest rates to boost the world's largest economy.
Light, sweet crude for December delivery was up $2.11 to $69.61 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract overnight rose $5.56 to settle at $68.29. Oil prices have fallen by about 54 percent since peaking at nearly $150 a barrel in mid-July.
"Oil prices rose last night and we see a marginal continuation of that trend in trade this morning," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney.
But Moore warned the rally may not be sustainable amid persistent concerns of a global economic recession.
"It's possible we might see some more dips in prices in the very near term but in the longer run, by 2009, we expect oil prices to recover," he said.
Thursday's gains were supported by a weak dollar which retreated further after the Fed cut a key interest rate by half a percentage point Wednesday, its lowest in a half-century to help stem the worst U.S. financial crisis in decades.
The Fed also announced it will supply new lines of credit worth up to $30 billion to the central banks of South Korea, Brazil, Mexico and Singapore to shore up confidence and help deal with the global credit crisis.
The dollar slid to $1.3206 against the euro Thursday in Asia, from $1.2962 late Wednesday in New York.
A weak dollar is "an important factor behind oil price rise. Equity markets has also been quite firm," which further boosted prices, Moore said.
Investors often buy commodities such as crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises. Oil investors have also been tracking equity indexes as a barometer of global economic health.
Despite the interest rate cut, the Dow Jones industrial average, which soared nearly 900 points or 11 percent Tuesday, fell 74.16 points or 0.8 percent on Wednesday.
Some analysts said the drop partly reflected growing worries about whether the government's actions will be sufficient to avert a deep and prolonged recession.
But stock markets in Asia soared Thursday, led by South Korea's benchmark stock index which gained more than 10 percent.
In other Nymex trading, gasoline futures rose 5.57 cents to $1.5887 a gallon, while heating oil gained 5.45 cents to fetch $2.0555 a gallon. Natural gas for November delivery was flat at $6.47 per 1,000 cubic feet.
In London, December Brent crude rose $1.77 to $67.24 a barrel on the ICE Futures exchange.