Oil prices hover above $71 amid weak demand

       Oil prices hovered above $71 a barrel yesterday as signs of weak crude demand were offset by the effects of a slumping US dollar.
       Benchmark crude for November delivery was down 6 cents at $71.70 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added $1.83 a barrel to settle at $71.76 on Tuesday.
       Oil prices have traded between $65 and $75 for months as consumer demand in the US has remained tepid despite evidence of an economic recovery.
       "Brimming oil stocks around the world continue to expose demand weakness," said JBC Energy in Vienna.
       US oil inventories rose unexpectedly last week, the American Petroleum Institute said late Tuesday. Crude stocks increased 276,000 barrels while analysts had expected a drop of 2.25 million barrels,according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
       "The reason oil is trading in this range is this battle between weak supply fundamentals and optimism for economic recovery,' said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
       "This seems to be a level that both producers and consumers are happy with."
       A weakening US dollar, meanwhile,has helped support oil prices. Because crude is priced in dollars, investors outside the US buy it up when the dollar drops. The euro rose yesterday in European trading to $1.4817 from $1.4788 the previous day while the dollar fell to 90.99 yen from 91.15.
       Olivier Jakob of Petromatrix in Switzerland said that while the Dollar Index _ which values the dollar against a basket of foreign currencies _ was now at same level as in September 2008, back then the Nymex contract was worth $109 a barrel.
       The big difference, Jakob noted, 'is that US petroleum stocks are at least 140 million barrels above the levels of a year ago."
       In other Nymex trading, gasoline for October delivery was down 1.91 cents to $1.7625 a gallon, and heating oil lost 0.26 cent to $1.8095 a gallon. Natural gas was up 0.4 cent to $3.613 per 1,000 cubic feet.
       In London, Brent crude fell 37 cents to $70.16 on the ICE Futures exchange.
       Investors are closely monitoring the results of a US Federal Reserve policy meeting that could indicate the pace of economic recovery of the United States, the biggest energy consumer. The meeting ends yesterday.
       Leaders from the Group of 20 developed and developing nations are also expected to discuss the state of the global economy when they meet later this week in the US city of Pittsburgh.