Crude oil slipped marginally to US $81.1 in New York, while Brent crude was inched up to US$79.54, as the market awaits release of existing homes sales figures that will further clarify the state of the US economy. Earlier this week, optimism over the global economic recovery amid a weakening dollar, pushed up crude prices to this year’s peak at US$82. The dollar sank to a 14-month low against the euro, renewing concerns about higher oil prices and other inflationary threats. Crude oil is priced in dollars. So when the dollar falls, oil producers demand a higher dollar price to make up for the lost purchasing power relative to other currencies. Oil, which was trading below $70 a barrel in early October, has been rising steadily as the dollar has fallen. A lower dollar makes US exports cheaper, aiding the domestic manufacturers, benefits factories in China as it pegs its currency to the dollar, but makes European imports more expensive. Uptil now, the dollar's decline has been disciplined, returning to levels that preceded the financial crisis.
OPEC is also mulling a hike in production at its meeting in December if key conditions are met, depending on higher oil prices and improving economic growth.