Oil holds above $81 as global economy recovers

NEW YORK -- Oil prices surged 15 percent this month, dredging up memories of last year's spike and gas prices could soon eclipse summer highs.

Crude is being tugged higher for different reasons this time, rising primarily as the dollar gets weaker. Oil is traded in the dollar, which allows investors holding euros or other strong currencies to buy more as the dollar falls.

The dollar hit an annual low on Friday, and anyone holding a euro could trade it in for more than $1.50.

By Friday, even the plunging value of the dollar could not push prices higher as it had throughout the week, most likely because there is little to suggest that all of that oil will be used.

Energy demand is extremely weak and the country's storage tanks are brimming with crude, said Peter Beutel, an analyst at Cameron Hanover.

There are also whispers that the Organization of the Petroleum Exporting Countries, which supplies more than 35 percent of the world's crude, will decide to open up the spigots when it meets in December.

"At some point, the bubble has to burst," Beutel said.

The dollar had also weakened during last year's run-up to $147 per barrel, but there were other reasons for buying oil. Petroleum companies were nearing their peak production levels and traders fretted about the growing energy appetites of China and other developing countries.

This year, there is no immediate danger of an oil shortage with the U.S. and other countries mired in recession.

Benchmark crude for December delivery gave up 10 cents Friday to $80.09 a barrel on the New York Mercantile Exchange. Oil was trading at less than $70 per barrel to start the month.

In London, Brent crude for December delivery lost 60 cents to $78.91 on the ICE Futures exchange.

Just like last summer when soaring oil prices dragged gasoline prices higher, prices at the pump have been rising steadily.

At the pump, retail gas prices added 2 cents to a new national average of $2.636, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon or regular unleaded is 9.6 cents more expensive than last month, but it's still 18.6 cents cheaper than a year ago.

In other Nymex trading, heating oil dropped 1.93 cents to $2.0753 a gallon. Gasoline for November delivery was lost less than a penny to $2.037 a gallon, while natural gas for November delivery lost 6 cents to $4.887 per 1,000 cubic feet.