Crude Rebounds, Tops $92/Barrel as Dollar Drops

Crude futures rebounded Thursday, aiming for new two-year highs as oil traders reacted to a big drop in the dollar.

Light, sweet crude for February delivery recently traded $0.38, or 0.4%, higher at $92.24 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded $0.36 higher at $98.48 a barrel, continuing its march toward triple digits.

The euro was recently up 1.8% to $1.3358 on fading worries about Europe's sovereign debt situation.

"The oil market just can't ignore this dollar move," said Peter Donovan, vice president and oil trader with Vantage Trading in New York. "It's tough for the market not to pay attention when the euro makes a big move yesterday and it's moving higher today."

The currency moves helped extend the recent oil price rally, as it follows recent drops in U.S. oil stockpiles and the shutdown Saturday of the Trans Alaska Pipeline, a key supply route for refineries on the U.S. West Coast. Futures have risen by 15% from lows near $80 a barrel in mid-November.

Gasoline futures also weighed on the rally. Front-month February reformulated gasoline blendstock, or RBOB, recently traded nearly flat, up 0.02 cent at $2.4633 a gallon. U.S. stockpiles of the fuel rose by 5.1 million barrels last week, surprising analysts by the size of the increase.

Improving economic data over the past several weeks have been a key driver for rising oil prices. With demand in China strong, analysts say that a continued recovery in the U.S. and Europe should help relieve the oil supply glut built up through the economic downturn.

But unemployment in the U.S. remains high, which could keep a lid on demand for fuels, particularly with retail gasoline prices now above $3 a gallon.