AFP reported that oil prices rose towards USD 74 driven by prospects of improved demand as the economy recovers and as cold weather hits the US earlier than expected.

Analyst said that New York's main contract, light sweet crude for delivery in November climbed 35 cents to USD 73.62 per barrel. Brent North Sea crude for November delivery gained 51 cents to USD 71.87 per barrel in early London trade.

Traders said that oil prices closed up more than a dollar boosted by expectations of higher crude demand and a weaker dollar. The International Energy Agency recently forecast a rise in demand at the end of this year and into 2010 as the global economy recovers from a slump. The agency revised upwards its estimate for global demand this year by 200,000 barrels per day and for 2010 by 350,000 barrels.

Mr Phil Flynn analyst of PFG Best said that "Stunning records for cold were set across the nation increasing the demand for heating fuels over the weekend."

Another factor that drove oil prices was the weakening dollar, prompting fund managers to protect themselves against the fall by buying hard assets like oil and other commodities. A struggling greenback tends to boost crude particularly because the dollar-denominated commodity becomes cheaper for foreign buyers holding stronger currencies.

Mr David Moore analyst of Commonwealth Bank of Australia said that I think the fragility of the US dollar has been a supporting factor. Demand for oil plunged as the world entered its worst financial downturn since the Great Depression with crude prices falling from historic highs of more than USD 147 in July 2008 to about USD 32 in December. They have since won back ground on economic recovery hopes.

(Sourced from AFP)