Oil Trades Above $78 a Barrel After Climbing to Three-Week High

Dec. 28 (Bloomberg) -- Crude oil traded above $78 a barrel in New York after rising to a three-week high on signs that the U.S. economy is recovering.

Oil climbed to $78.05 a barrel on Dec. 24, the highest settlement since Dec. 1, as initial U.S. jobless claims dropped more than expected and orders for durable goods excluding transportation equipment beat economists’ forecasts. The U.S. dollar rose against 13 of its 16 major counterparts.

“I don’t think oil is going to go much further this year,” Peter McGuire, a managing director at CWA Global Markets Pty, said by telephone in Sydney today. “It depends on the U.S. dollar. If it continues to strengthen, commodities will come off, but if it weakens you could see a nice rally.”

Crude oil for February delivery was at $78.21, up 16 cents, in electronic trading on the New York Mercantile Exchange at 11:40 a.m. Sydney time. Oil has gained 75 percent this year.

The dollar advanced to $1.4374 per euro today from $1.4411 in New York on Dec. 25. A stronger dollar limits the appeal of commodities as an alternative investment.

The decline in U.S. homes prices likely eased further, economists said. Property values in 20 U.S. metropolitan areas probably fell 7.1 percent in October from a year earlier, the smallest 12-month drop since 2007, according to a median forecast of 29 economists surveyed by Bloomberg News before a Dec. 29 report from S&P/Case-Shiller.