Oil rises above $71

NEW YORK -- Oil prices rose above $71 a barrel Thursday as a weaker dollar drove investors toward energy commodities.

Benchmark crude for September delivery added 80 cents at $70.96 a barrel on the New York Mercantile Exchange. In London, Brent crude prices climbed $1.25 to $74.14 a barrel on the ICE Futures exchange.

Oil prices typically would be depressed by tepid demand for gasoline and a growing surplus of crude in the U.S. But Analyst Antoine Halff said the tactic of buying oil contracts as a hedge against inflation is "back with a vengeance."

This means crude's "underlying value will remain resilient or even increase as the economy recovers and demand perks up," Halff said in a research note.

The U.S. Dollar Index, which measures the dollar against other major currencies, dropped Thursday -- a day after the Federal Reserve said it would hold interest rates at record lows.

The central bank also will continue an emergency program to buy Treasury securities until October. The program is meant to lower mortgage rates and other consumer debt, but some economists see it as inflationary, making it look like the government is printing money to fix the economy.

Meanwhile, government reports showed that the U.S. economy remains on shaky ground.

The Commerce Department said Thursday that retail sales fell 0.1 percent last month. Economists expected a gain of 0.7 percent. And the Labor Department said initial jobless claims grew more than expected to a seasonally adjusted 558,000.

The Energy Department's Energy Information Administration also said natural gas stockpiles grew last week. The country's natural gas inventory can be used to measure energy demand in the U.S., since many power plants use it to produce electricity.

The build in natural gas was less than expected, though inventory levels are now 20 percent above their five-year average for this time of year.

In other Nymex trading, gasoline for September delivery gave up less than a penny at $2.0234 a gallon. Heating oil rose by 1.66 cents to $1.9087 a gallon. Natural gas for September delivery gained 1.2 cents to fetch $3.491 per 1,000 cubic feet.