Crude Oil Extends Gains as Dollar Weakens Ahead of OPEC Meeting

March 17 (Bloomberg) -- Crude oil traded above $82 in New York after rising as the dollar fell against the euro, buoying demand for commodities as an alternative investment, and as OPEC ministers indicated they would refrain from increasing output.

Oil rose the most in four weeks yesterday after Standard & Poor’s Ratings Services affirmed its sovereign-credit ratings on Greece, strengthening the euro. Saudi Arabian Oil Minister Ali al-Naimi said this week oil prices are in the right range. The kingdom is OPEC’s biggest producer.

“The combination of the U.S. dollar weakness and some euro strength really played well for commodities,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “The broad consensus is that OPEC will leave production rates unchanged, and I can’t see any reason why they wouldn’t.”

Crude oil for April delivery gained 47 cents, or 0.6 percent, to $82.17 a barrel, in electronic trading on the New York Mercantile Exchange at 10:30 a.m. Sydney time. Yesterday, the contract rose $1.90, or 2.4 percent, to $81.70 a barrel.

The dollar traded unchanged at $1.3766 per euro at 10:31 a.m. Sydney time, after falling 0.7 percent yesterday. Some investors buy commodities such as oil and gold as an alternative investment to the dollar.

The U.S. currency remained lower after the Federal Reserve retained its pledge to keep the main interest rate near zero for an “extended period” to stimulate the economy. The U.S. is the world’s largest energy consumer. The Energy Department said last week that oil prices will average 30 percent higher in 2010 from 2009 as demand rebounds with the global economic recovery.

Crude Supplies

Crude oil inventories rose by 403,000 barrels last week to 344 million, the American Petroleum Institute said in a report yesterday. Supplies of distillate fuel, a category that includes heating oil and diesel, fell by 756,000 barrels, the API said.

A U.S. government report today may show crude inventories rose 1.1 million barrels in the week ended March 12 from 343 million the week before as refineries bolstered stockpiles before the summer driving season. The outlook is based on the median of 17 estimates in a Bloomberg survey. It would be the seventh consecutive increase.

The Energy Department is scheduled to release its inventory report at 10:30 a.m. in Washington.

“With the fundamentals, it’s a similar story to how economic growth is panning out,” Westmore said. “Fundamentals are weak in the U.S. and Europe. In Asia, with the demand recovery, it seems like stocks aren’t quite as big a problem, so there is this two-speed recovery.”

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, is scheduled to meet today for the first time this year.

OPEC cut output quotas by a record 4.2 million barrels a day at the end of 2008 as demand plunged. Compliance fell to 53 percent in February, OPEC said last week in its monthly report. The group will maintain existing targets as prices hold above $80 a barrel, according to 42 of 44 analysts surveyed last week by Bloomberg News.