Oil rises to near $73 in Europe as investors eye stocks, euro gains

Oil rises to near $73 as stocks, euro gain

Oil prices rose to near $73 a barrel Tuesday, helped by strong gains in stock markets and the euro.

By early afternoon in Europe, benchmark crude for August delivery was up 76 cents to $72.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract last settled on Friday, losing 81 cents to $72.14.

U.S. markets were closed Monday for the Fourth of July holiday but were expected to rise on the open Tuesday. Stocks in Europe and Asia rose while the euro advanced to $1.2578 from $1.2537.

Crude traders often follow equities as a barometer of overall investor sentiment and a stronger euro makes dollar-based commodities such as oil cheaper for investors holding the European currency.

Investor fears of a double-dip recession in Europe and the U.S. later this year have been weighing on stocks and commodities in recent weeks. A weaker than expected June jobs report on Friday added to concern the U.S. economic recovery could peter out once massive government spending stimulus ends.

“Nervousness about the broader … economy and sustainability of demand keep oil prices under the thumb,” Barclays Capital said in a report.

Some analysts are slashing oil price projections despite strong crude demand from emerging economies. Barclays cut its forecast for the average oil price in the fourth quarter to $87 a barrel from the previous estimate of $92 and lowered its prediction for 2011 to $92 from $97.

Others were more optimistic.

“For the moment, despite the growth jitters, it seems to us that both the U.S. and the global recovery will remain intact, and although growth seems to have clearly downshifted a gear or two, we are not looking for a double-dip,” said Edward Meir of MF Global in New York, adding that he would be “very surprised to see prices stay below $70 for a considerable period.”

A stronger-than-usual hurricane season forecast in the Gulf of Mexico this year may also provide a floor for oil markets.

“Support for oil prices could come from the new storm developing in the Caribbean, which could set course for the Gulf of Mexico,” said Commerzbank in Frankfurt. “As the hurricane season strengthens, it will probably prevent oil prices from falling below $70, although high inventories provide enough buffer to cushion temporary hurricane-related supply stoppages.”

In other Nymex trading in August contracts, heating oil rose 0.97 cent to $1.9252 a gallon, gasoline gained 0.23 cent to $1.9800 a gallon and natural gas jumped 10.4 cents to $4.791 per 1,000 cubic feet.

In London, Brent crude rose 98 cents to $72.45 a barrel on the ICE Futures exchange.

Associated Press writer Alex Kennedy in Singapore contributed to this report