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Crude oil rises above $86 a barrel on favorable economic reports and weaker dollar
NEW YORK (AP) ' Oil rose 2 percent Tuesday as encouraging economic news from Asia and Europe boosted the euro and other currencies against the dollar.
Oil is traded in dollars, and it tends to rise as the greenback weakens and makes crude less expensive for investors holding foreign money.
Benchmark West Texas Intermediate crude for October delivery rose $1.67, or 2 percent, to $86.09 per barrel in afternoon trading in New York. Brent crude, which is used to price oil produced abroad, increased $1.08 to $109.44 per barrel in London.
The dollar dropped following reports that manufacturing activity in China and Europe was better than expected. It also weakened on speculation that Federal Reserve Chairman Ben Bernanke might try to stimulate the sluggish U.S. economy with another round of bond buying. Bernanke is expected to have an announcement about helping the economy on Friday.
"The Fed trumps anything that's happening in Tripoli right now," said analyst and trader Stephen Schork, referring to the apparent collapse of Moammar Gadhafi's regime in Libya.
An end to the country's six-month rebellion would clear the way for oil exports to resume, but Schork and other analysts cautioned that it would likely take more than a year for Libyan oil to begin flowing at levels that would affect prices.
"Crude from Libya is going to be a story for 2012 or 2013. Not today," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Fighting during the last six months has all but stopped activity in Libya's oil fields. The country previously supplied about 1.5 million barrels per day for world markets. That's roughly 2 percent of daily global oil demand.
In other trading for September contracts, heating oil rose 4 cents to $2.9483 per gallon and gasoline futures gained 3 cents to $2.8696 per gallon. Natural gas rose 8 cents to $3.966 per 1,000 cubic feet.