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Oil near $74 as weak dollar offsets high supplies

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Oil prices rose to near $74 a barrel Wednesday, boosted by a weaker dollar but held back by a report showing unexpected growth in U.S. crude inventories, casting more doubt on the recovery in the world’s biggest economy.

By early afternoon in Europe, benchmark crude for March delivery was up 20 cents at $73.95 a barrel in electronic trading on the New York Mercantile Exchange, moving between $73.18 and $74.30.

On Tuesday, the contract jumped $1.86 to settle at $73.75 a barrel.

The euro gained on the U.S. dollar Wednesday as the European Union seemed on the verge of offering financial support to Greece to keep it from buckling under its debt burden.

The euro traded at $1.3791 in European trading, up from $1.3775 late Tuesday in New York. It gained about one U.S. cent on Tuesday and traded as high as $1.3806 on Wednesday.

A weaker dollar makes crude cheaper for investors holding other currencies.

Despite the euro’s gains, the fundamentals of supply and demand continued to be bearish for the oil markets.

U.S. crude stocks jumped 7.2 million barrels last week, the American Petroleum Institute said late Tuesday, suggesting weak consumer demand for fuels like gasoline and heating oil. Analysts had expected an increase of 2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Department’s Energy Information Administration has delayed announcement of its inventory report — the market benchmark — until Friday from Wednesday because of snow storms.

Sluggish crude demand is weighing on oil prices as investors continue to mull over concerns about the health of the global economy.

“While China’s lending restrictions and potential changes in US banking regulations were the first seeds of concern sown in the minds of investors, the latest has come about due to the short-term financing needs in Southern European countries,” Barclays Capital said in a report.

“In the short-term, oil prices may be caught in between the shrapnel of negative macro sentiment yet improving fundamentals, resulting in some heightened volatility,” Barclays said.

In other Nymex trading in March contracts, heating oil rose 0.6 cent to $1.9379 a gallon, and gasoline was up 0.4 cent at $1.9330 a gallon. Natural gas rose 6.1 cents to $5.351 per 1,000 cubic feet.

In London, Brent crude was down 10 cents at $72.03 on the ICE futures exchange.

Associated Press writer Chun Han Wong in Singapore contributed to this report.

© 2010 Associated Press. Displayed by permission. All rights reserved.

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