Oil strikes 6-week high amid Greece bailout talk

Posted at 02/22/10 1:09 PM

PERTH - Oil prices rose to a six-week high above $80 a barrel on Monday, extending the previous session's gains, as speculation over a quick bailout for debt-laden Greece helped pushed the US dollar lower.

Concerns about an extended refinery strike in France and escalating tensions over Iran's nuclear program also lent support to oil prices.

US crude for March delivery rose 57 cents to $80.38 a barrel by 0254 GMT, after having struck $80.47 -- the highest since Jan 13. London Brent crude rose 63 cents to $78.82 a barrel.

"The weak dollar is the biggest driver for crude prices this morning and hopes of a financial rescue for Greece are propping up sentiments," said Clarence Chu, a trader with Hudson Capital Energy in Singapore.

The US dollar index fell 0.29% against a basket of currencies on Monday, as investors reassessed chances of an earlier-than-expected interest rate hike by the Federal Reserve while the euro was lifted by speculation of a quick bailout for Greece.

German weekly Der Spiegel reported on Saturday that Germany's finance ministry had prepared plans in which countries using the single currency would provide aid worth between 20 billion and 25 billion euros for debt-laden Greece. The ministry refused to comment on the report.

Concern over Athens' ability to repay its debt mountain has shaken confidence in the euro and stirred fears that it may hinder global growth. Some analysts have said that a plan to rescue Greece would help allay sovereign debt concerns in Europe.

Separately, an extended strike at Total's six oil refineries in France and growing hostility between Iran and the West also aided bullish sentiment for crude.

Talks between Total and workers protesting the possible closure of the company's Dunkirk refinery in northern France collapsed on Sunday, the CGT union said, calling for a strike to spread to all French refineries.

An extended strike would lift Europe's gasoline prices and also push up prices across the energy complex, market participants said.

Russia said on Friday it was "very alarmed" by Iran's failure to cooperate with the IAEA, after the U.N. nuclear agency said it feared Tehran might be working to develop a nuclear missile.

Oil prices rose 7.7% rise on the week, their largest single-week percentage gain for front-month crude since October, thanks to a combination of positive economic data and growing tensions over sanctions against Iran.

Analysts said Wall Street could keep rallying after notching its best week this year if Federal Reserve Chairman Ben Bernanke gives a reassuring assessment of the recovery and retail earnings show improvement.

On OPEC rumblings, a senior Iranian oil official said on Saturday the producer group was unlikely to raise its output ceiling at its next meeting in March.

Money managers hiked their net long crude oil futures position on the New York Mercantile Exchange in the week through Feb. 16, the Commodity Futures Trading Commission said on Friday.