Oil hovers above $102 amid weaker dollar

Oil prices hovered above $102 a barrel Wednesday as traders eyed a weakening dollar and the possibility it could push crude back to 2-year highs.

By early afternoon in Europe, benchmark oil for July delivery was down 23 cents to $102.47 a barrel in electronic trading on the New York Mercantile Exchange. The contract added $2.11 to settle at $102.70 on Tuesday.

In London, Brent crude for July delivery was down 58 cents to $116.15 a barrel on the ICE Futures exchange.

Crude has risen from $96 last week as a falling dollar made commodities cheaper for investors with other currencies. The euro rose to $1.4398 from $1.4378 late Monday in New York. The dollar weakened to 81.41 yen from 81.50 yen.

"The dollar now seems to be on course to test the lows seen at the end of April," Cameron Hanover said in a report. "If that's the case, we could see stocks and oil prices also advance to test their late April highs."

Oil reached near $115 a barrel on May 2, the highest since September 2008.

Other supportive factors included the closure for repairs of a crude pipeline between Canada and the U.S. and more battles in Yemen between government forces and tribal fighters.

"Although Yemen is an insignificant oil producer, the implications of such fighting along Saudi Arabia's southern border is undoubtedly of concern to the markets," said Edward Meir of MF Global in New York. Saudi Arabia is the world's largest crude exporter.

Also on the agenda is the release of information on U.S. stockpiles of crude and refined products.

Data for the week ending May 27 is expected to show a draw of 1.9 million barrels in crude oil stocks and a rise of 1.2 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute will release its report on oil stocks later Wednesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Thursday. Both reports come a day later than usual due to Memorial Day.

In other Nymex trading in June contracts, heating oil was down 1.44 cents to $3.0386 a gallon and gasoline shed 1.36 cents to $3.0367 a gallon. Natural gas futures rose 1 cent to $4.675 per 1,000 cubic feet.