Oil holds near $99 a barrel in Europe

Associated Press

Oil traded near $99 a barrel Monday, largely holding on to gains after the Federal Reserve last week announced new steps to boost the U.S. economy.

By early afternoon in Europe, benchmark crude for October delivery was down 23 cents at $98.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract on Friday traded above $100 for the first time since May before closing up 69 cents at $99 in New York.

In London, Brent crude was down 27 cents at $116.39 on the ICE Futures exchange.

The dollar remained near a four-month low versus the euro as investors bet that the Fed's plan to keep interest rates low and spend billions buying securities would keep downward pressure on the U.S. currency. Commodities such as oil are traded in dollars and become cheaper for investors holding other currencies when the dollar weakens. On Monday, the euro was down slightly at $1.3110 from $1.3128 on Friday.

Anti-American unrest in the oil-rich Middle East, which was sparked by a film that is seen as ridiculing the Prophet Muhammad, also provided a floor for energy prices.

The U.S. Ambassador to Libya was killed during an attack on the consulate in Benghazi last week; protesters have also stormed the U.S. Embassy in Tunis and held violent demonstrations outside posts in Egypt and Sudan. The U.S. has responded by deploying additional military forces to increase security in certain hotspots.

"Although we see growing risks of speculative overheating on the oil market, the price climb is likely to continue given the phases of exaggerated price rises we saw following previous rounds of quantitative easing," said analysts at Commerzbank in Frankfurt. "In the current environment of healthy risk appetite, news of a possible escalation of the situation in the Middle East would fall on fertile soil and be more likely than before to result in an accelerated price increase."

In other Nymex energy futures trading, wholesale gasoline was down 0.84 cent at $2.9231 a gallon while heating oil was up 0.05 cent at $3.24 a gallon. Natural gas added 0.5 cent to $2.948 per 1,000 cubic feet.

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