Oil falls to near US$87 in Asia Tuesday(update)

SINGAPORE: Oil prices fell slightly to near $87 a barrel Tuesday in Asia, pausing a weeklong rally amid investor optimism the global economy may not slow in the second half as much as feared.

Benchmark oil for September delivery was down 40 cents to $87.48 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude surged $2.50 to settle at $87.88 on Thursday.

In London, Brent crude for October delivery was down 42 cents to $109.42 per barrel on the ICE Futures exchange.

Oil fell below $76 on Aug. 9 on investor fear the U.S. could be headed for a recession, which would drag down demand for crude. However, later that day the U.S. Federal Reserve pledged to keep its lending rates low for the next two years.

Low interest rates mean yields on bonds and other fixed income securities will also likely remain low, pushing investors seeking higher returns into stocks and commodities.

The Dow Jones industrial average rose 1.9 percent Monday, its third day of strong gains.

"Bottom line, the Fed is shoving capital toward higher-risk asset classes, which not only include equities, but also hard assets such as gold and oil," energy trader and analyst The Schork Group said in a report. "We don't think it's unreasonable for crude oil to test the $115 barrier before this year is out."

In other Nymex trading in September contracts, heating oil fell 0.9 cent to $2.94 a gallon while gasoline slid 1.0 cent at $2.86 a gallon. Natural gas futures gained 0.6 cents at $4.03 per 1,000 cubic feet. - AP

Earlier report

Oil rises 3% on broad market rally

NEW YORK: Oil jumped to the highest level in more than a week on some positive news about the global economy.

Oil was also pushed higher by a fall in the dollar. As the greenback weakens, investors who hold stronger foreign currencies are able to buy more crude. Monday's 3 percent rise to more than $87 per barrel all but erased losses in oil markets last week.

Crude rose Monday after Japan's economy shrank less than expected from April to June.

"Last week, we saw a market that was really driven by fear," PFGBest Phil Flynn said. "The data out of Japan shows that the world isn't falling off the map."

On Monday the dollar sank and oil rose after the government reported that foreign investors cut their holdings of U.S. Treasuries in June. The 0.4 percent decline happened when lawmakers were still fighting over a deal to increase the nation's borrowing limit.

The stock market also rose after a wave of acquisition announcements bolstered investor optimism.

China, the world's second-largest oil consumer behind the U.S., said that it expects its consumption to increase this year by 6.5 percent, according to Platts, the energy information arm of McGraw-Hill Cos.

Benchmark West Texas Intermediate crude for September delivery surged $2.50 to $87.88 per barrel on the New York Mercantile Exchange. That's the highest finish since Aug. 3.

Brent crude, which is used to price many international oil varieties, rose $1.88 to finish at $109.91 on the ICE Futures exchange in London.

In other Nymex trading for September contracts, heating oil rose 4.04 cents to end at $2.9441 per gallon and gasoline futures gained 5.23 cents to end the day at $2.8745 per gallon. Natural gas fell 3.6 cents to finish at $4.024 per 1,000 cubic feet. - AP