Oil edged up today after its biggest one-day fall since July a day ago, as intervention by the Swiss National Bank to buy euros pared dollar gains.
The dollar index, a measure of the greenback's performance against six major currencies, had earlier touched its highest in seven months as concern deepened about worsening fiscal problems in south European countries.
Sentiment remains fragile ahead of key US non-farm payrolls number out later in the day, which could show unemployment continuing to rise in the world's largest economy, especially after an unexpected increase in US jobless claims.
US crude oil for March delivery rose 34 cents to $73.48 a barrel at 7.19am. Yesterday it touched a 2010 intraday low of $72.42 and closed down 5 per cent. London ICE Brent for March gained 15 cents to $72.28.
"The dollar has weakened a bit from before and people tend to look to the dollar for guidance," said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
"The crisis in Europe, Greece, Portugal, Spain is going to put downward pressure on the euro until they are able to sort it out and confidence returns."
The euro leapt against the Swiss franc today following the Swiss intervention, after earlier plunging to a 15-month low against the franc and tumbling to its lowest level in more than eight months against the dollar.
Investors sold off stocks in Portugal, Spain and Greece yesterday, as market fears over the fiscal problems of debt-laden southern members of the euro zone widened.
The head of the International Monetary Fund called for painful steps to cut huge fiscal deficits across Europe, saying no country should be under the illusion it was possible to escape the financial crisis without paying the cost.
Oil's losses yesterday came after the futures posted their biggest daily percentage gain in four months on Tuesday, up 3.8 per cent.
But they are still about 50 per cent lower than the record above $147 in July 2008, having shed about $11 from a 15-month high close to $84 on Jan. 11.
Traders and brokers at several firms said they suspected yesterday's sell-off in crude was also linked to a hedge fund quickly unloading a big oil position.
A sudden rush of volume in front-month New York Mercantile Exchange (NYMEX) crude oil futures trading during the final moments of open-outcry trading on Wednesday was followed yesterday by the fifth-highest trading volume on record for the contract at nearly 500,000 lots.
Reuters