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Oil prices up on eve of OPEC meeting

Wednesday, September 09, 2009 NEW YORK: Oil prices jumped Tuesday ahead of OPEC talks on the back of buoyant gold demand, a weakening US dollar and confidence that the global economy will recover from a sharp downturn. Comments by oil kingpin Saudi Arabia that the crude market was "very stable and healthy" were also seen providing support for prices, analysts said. New York's main contract, light sweet crude for October delivery, jumped 3.08 dollars from last Friday's close to end at 71.01 dollars. London's Brent North Sea crude for October climbed 2.89 dollars to 69.42 dollars."A weak dollar spreads the idea that oil can be a hedge against the dollar (and) we're talking about stronger economic performance now and oil is one of the commodities that benefits from that," said Bart Melek of BMO Capital Markets. "The dollar is certainly a big factor," Melek said. A weaker dollar makes dollar-priced oil cheaper for buyers using stronger currencies.Phil Flynn, analyst at PFG Best, attributed the oil rally to surging gold prices, which rose to an 18-month high above 1,000 dollars an ounce, and worries about inflation."Black gold is rising, being driven by the more traditional yellow gold," he said. "The mellow yellow isn't so mellow as its move is raising inflationary caution flags and is dragging up oil and other commodities as well." Nimit Khamar, analyst at Sucden Financial Research, said prices rose on increased expectations that the OPEC meeting Wednesday would see more emphasis on tightening compliance with the current quota. OPEC's leading member Saudi Arabia gave an upbeat view of the oil market on Tuesday as ministers gathered in Vienna looking to hold the flow of crude steady amid cautious talk of an economic recovery. "The market is very stable and healthy," Saudi Arabian Oil Minister Ali al-Naimi said on arriving in the Austrian capital for a meeting of the Organization of the Petroleum Exporting Countries (OPEC) on Wednesday.

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