Oil, gas prices rise on China currency move

By Associated Press
Posted June 21, 2010 at 3:19 p.m.

China’s move to end its currency’s peg to the dollar initially fanned enthusiasm for crude, since a stronger yuan will make dollar-based commodities such as oil cheaper in China and bolster demand, but oil prices gave up earlier gains Monday afternoon as uncertainty set in about how quickly China may implement currency changes trimmed oil prices.

Crude gained 64 cents, to settle at $77.82 a barrel, on the New York Mercantile Exchange after rising as high as $78.92.

Retail prices for gasoline in the United States have climbed over the last week and are headed back toward a national average of $2.80 to $2.90 per gallon with higher prices on the West Coast, said Tom Kloza of the Oil Price Information Service.

Prices dropped for about six weeks as oil prices fell over worries that the European debt crisis could spread and crush the global economic recovery and demand for crude.

Those worries have since ebbed, oil is rising again and the stock market has started to recover some of its recent losses.

Kloza said he expects the price increases to be modest.

“Much higher prices would roil the economic picture, and the oil price rally has been largely on the coattails of the stock market recovery,” he said.

Prices rose 0.3 cent to a national average of $2.737 per gallon on Monday, according to AAA, Wright Express and Oil Price Information Service. Prices have risen 3.9 cents in the last week and are 7.5 cents below levels of a month ago. Pump prices are 4.4 cents higher than a year ago.

The government’s Energy Information Administration will release its weekly report on retail gasoline prices later Monday.

The stock market also pulled back after jumping more than 100 points Monday morning on the China news. In recent weeks oil prices have followed signals from stocks about the direction of the economy.

“I think what happened is the market was looking really strong early on,” said Rich Ilczyszyn, senior market strategist for the Lind-Waldock brokerage. “It didn’t have enough power to continue that rally. The longer we sit up there, the more attractive it looks to sell.”

In other Nymex trading, heating oil rose 1.70 cents to settle at $2.1459 a gallon, gasoline dropped 0.48 cent to settle at $2.1428 a gallon and natural gas fell 12.4 cents to settle at $4.873 per 1,000 cubic feet.

Brent crude rose 60 cents to settle at $78.82 on the ICE futures exchange.

Associated Press writers Mark Williams in New York, Nataliya Vasilyeva in Moscow and Alex Kennedy in Singapore contributed to this report.

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