Oil up over $78 on weak dollar

Crude rose for a seventh session to a one-year high above $78 a barrel today, after an unexpectedly steep drop in US oil product stocks and further weakness for the dollar.

Year highs for US stocks also helped crude power towards its best week of gains in nearly two months, even though investors were disappointed by results from top US banks Goldman Sachs and Citigroup.

The release of US September industrial production and capacity utilisation data, and a report on consumer sentiment for October, will offer more insight into the strength of the world’s largest economy and top oil user.

US crude for November delivery rose 48 cents to $78.06 a barrel by 0215 GMT, after settling $2.40 higher at $77.58 yesterday. London Brent crude was up 40 cents at $76.63.

Crude is headed for a gain of 8.75% this week, and is its longest winning streak since July, but there are some worries about how long the rally can be sustained.

“A correction is on the cards. I would expect profit taking to set in next week, and oil to retreat to the mid- to low-$70s,” said Ben Westmore, commodities analyst with the National Australia Bank.

“Fundamentals remain weak. Global inventories are still pretty high, and unless we see the supply overhang being worked off, an oil price in the high-$70s is really not justified.”

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