Oil rises above $81 on stock rally, weaker dollar

LONDON — Oil prices rose above $81 a barrel Thursday, driven by a rebound in stock markets and the effects of a weaker dollar.

Benchmark oil for December delivery was up $1.22 to $81.66 a barrel by early afternoon in Europe in electronic trading on the New York Mercantile Exchange. The contract fell $1.90 to settle at $80.44 on Wednesday.

Oil traders often look to stock markets as a measure of overall investor sentiment, and European indexes rose Thursday, led by gains in France of 2.4 percent. Investors believe that if companies are doing well, that will result in higher demand for energy.

The dollar weakened nearly 1 percent against the euro and it was also down against the British pound, making crude cheaper for investors with those currencies. The dollar was little changed against the yen.

Oil has fallen from a two-year high of $88 last week on concerns that measures by Chinese policymakers to contain inflation will undermine economic growth and demand for crude. China has led the world this year in fuel consumption growth as developed countries struggle to regain robust economic expansion after last year's recession.

"While a rise in risk aversion in the past few days has brought prices down since, this is most probably a short-lived correction," Commerzbank said in a research note.

"Against the backdrop of renewed quantitative easing of U.S. monetary policy, further investment inflows in commodities are likely in the coming months. The weaker U.S. dollar should also lead to higher price levels," it added.

In other Nymex trading in December contracts, heating oil rose 3.8 cents to $2.29 a gallon and gasoline gained was up 2.5 cents at $2.13 a gallon. Natural gas fell 0.1 cent to $4.02 per 1,000 cubic feet.

In London, Brent crude added $1.30 to $84.58 a barrel on the ICE Futures exchange.