Oil briefly above $80 as earnings beat forecasts

NEW YORK -- Oil futures on Tuesday briefly topped $80 a barrel for the first time in a year before pulling back on a strengthening dollar.

The impact of the U.S. currency became abundantly clear midmorning when crude prices fell by 1 percent as soon as the dollar went into positive territory against the euro.

Crude prices have risen swiftly this month, moving in the opposite direction of the dollar. When the dollar loses value, crude becomes very attractive as an investment. Crude is traded in dollars, so it essentially gets cheaper when the U.S. currency is weak.

Benchmark crude for November delivery fell 65 cents to $78.96 on the New York Mercantile Exchange. Earlier in the day, a barrel ran as high as $80.05 as the euro came close to $1.50 against the dollar.

The November contract expires at the end of trading Tuesday. Oil for December delivery also was down, falling 84 cents to $79.12.

"Once we hit $80 now the question is what's next?" PFGBest analyst Phil Flynn said.

Better-than-expected earnings reports from several big companies in the past two weeks including Intel Corp. have bolstered hopes that the U.S. economy is recovering. The market reached new highs Monday, with major indexes gaining about 1 percent.

Crude did a chin-up over $80 a barrel after Apple Inc. and Texas Instruments Inc. reported third quarter earnings that beat analyst forecasts.

Crude demand, however, has remained sluggish this year as the global economy recovers from recession. With the Federal Reserve keeping interest rates at near zero percent, investors have flocked to stocks and commodities to make money.

"This rally isn't based on fundamentals. It's about risk appetite," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "Money is looking for some kind of return."

On Wednesday the U.S. government releases oil and gasoline inventory data. Crude in storage is expected to rise because demand remains weak. Gasoline, however, is expected to fall by more than 2 million barrels because U.S. refiners have cut production.

There is little demand for gasoline and refiners are seeing profit markets disappear due to rising oil prices.

In other Nymex trading, heating oil fell less than a cent to $2.0463 a gallon. Gasoline for November delivery about the same to $1.9795 a gallon. Natural gas for November delivery rose 34 cents to $5.164 per 1,000 cubic feet.

In London, Brent crude for December delivery fell 53 cents to $77.24 on the ICE Futures exchange.