Crude-oil futures fell back on Friday, but still rose slightly for the week, with a stronger dollar capping gains for most commodities after Federal Reserve Chairman Ben Bernanke said loose monetary policy will end eventually.
In morning trade, oil posted some gains along with stocks as investors continued to take an upbeat view of earnings and the economy. The U.S. trade deficit unexpectedly narrowed in August thanks to a big drop in imports of crude oil, the Commerce Department said. See full story.
But in recent action, crude for November delivery fell 65 cents to $71.04 a barrel on the New York Mercantile Exchange. It earlier rose to an intraday high of $72.24 a barrel and fell to a low of $70.58.
Crude oil remains up 0.1% from $69.95 at last Friday's close.
"We suspect that there is more room to go on the upside, particularly if the dollar continues its descent to the 1.50 mark against the euro," said Edward Meir, analyst at MF Global, in a note to clients.
"The fundamentals do not look that positive for the moment, but the dollar is clearly masking this weakness," Meir said.
In recent foreign-exchange action, the dollar index (DXY 76.48, +0.51, +0.67%) , which tracks the performance of the greenback against a basket of major currencies, rose firmly to 76.447. See Currencies.
Late Thursday, Bernanke said that low-rate monetary policy eventually will have to come to an end, once the U.S. economic outlook "improves sufficiently." At the same time, he said, accommodative policy will still be needed for an extended period.
Crude prices rallied 3% on Thursday, playing off aluminum giant Alcoa Inc. (AA 14.16, -0.19, -1.33%) and its report of a surprise third-quarter profit as well as government figures showing weekly jobless claims fell last week. See Indications.
IEA lifts demand views
Also Friday, the International Energy Agency raised its forecasts for global oil demand for both this year and 2010, citing more optimistic economic estimates issued by the International Monetary Fund as well as strong preliminary data from the Americas and Asia. Read more.
The agency raised its expectations by 200,000 barrels a day, to average demand of 84.6 million barrels a day, for 2009, and by 350,000 barrels a day, to 86.1 million barrels a day, for 2010.
Despite the increased forecasts, global oil demand in 2009 will still be 1.9% below last year's level, the Paris-based IEA said in its monthly report.
Elsewhere in the energy complex, November natural-gas futures fell 10 cents, or 2%, to $4.86 per million British thermal units.
The United States Oil Fund (USO 36.90, +0.22, +0.60%) fell 0.4% and the United States Natural Gas Fund (UNG 11.86, -0.15, -1.25%) dipped 1%.
