Oil climbs to near $72 amid weak dollar

Oil prices rose to almost $72 a barrel Thursday, helped by a weaker U.S. dollar, steady OPEC production levels and a new report predicting a less severe slump this year in global oil demand.

By midday in Europe, benchmark crude for October delivery was up 50 cents to $71.81 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the day, the contract peaked at $72.44. On Wednesday, the contract rose 21 cents to settle at $71.31.

Crude has jumped from $68 a barrel in two days as the dollar weakened to its lowest level this year. Because crude is priced in the U.S. currency, it becomes cheaper when the dollar falls. Some investors also use commodities like oil and gold as a hedge against inflation and dollar weakness.

The euro was slightly lower Thursday at $1.4532 after breaking through $1.46 on Wednesday, its highest level in a year. The British pound also fell marginally to $1.6525 compared with $1.6569 late Wednesday in New York.

The Organization of Petroleum Exporting Countries confirmed early Thursday at its meeting in Vienna that it would keep crude output unchanged.

OPEC said "market fundamentals have remained weak" and that "whilst there are signs that economic recovery is under way, there remains great concern about the magnitude and pace of this recovery," especially in the West.

"Since the market remains oversupplied and given the downside risks associated with the extremely fragile recovery, (OPEC) once again agreed to leave current production levels unchanged for the time being," said an OPEC statement released at the end of the meeting.

Meanwhile in Paris, the International Energy Agency said the slump in global oil demand in 2009 would be less severe than previously forecast and predicted consumption would rise in 2010 as the world economystabilizes.

The IEA said Thursday that crude demand would reach 84.4 million barrels a day this year, down 2.2 percent from 2008 levels — but better than the 2.7 percent decline the agency forecast previously.

The IEA also raised its forecast for oil demand in 2010 to 85.7 million barrels a day, or half a million barrels a day more than its previous forecast.

In other Nymex trading, gasoline for October delivery was steady at $1.83 a gallon, and heating oil gained 0.95 cent to $1.80 a gallon. Natural gas rose 4.3 cents to $2.87 per 1,000 cubic feet.

In London, Brent crude was up 62 cents to $70.45 on the ICE Futures exchange.