NEW YORK—Oil prices rallied Tuesday in New York, rebounding from the previous day’s heavy losses as a weaker dollar boosted demand for dollar-priced commodities.
New York’s main contract, light sweet crude for delivery in May, surged $1.03 to finish at $108.15 a barrel.
By contrast, London’s Brent North Sea crude for June delivery shed 28 cents to settle at $121.33.
The benchmark WTI futures contract had fallen more than $2.50 a barrel Monday after ratings agency Standard & Poor’s cut its US sovereign debt outlook to “negative,” warning the world’s largest oil-consuming nation could lose its top triple-A rating.
After starting the New York session in the red, the market saw “a turnaround in sentiment,” with equities rallying and the dollar weakening, said Matt Smith at Summit Energy.
A weaker US currency makes dollar-priced crude oil more attractive to buyers using stronger currencies.
Adding to supply concerns spurred by unrest in the Arab world was deadly rioting in Nigeria following the election of acting president Goodluck Jonathan as president of the biggest oil producer in Africa.
Jonathan, the first president from the southern oil-producing Niger Delta region, was declared winner late Monday of a landmark vote that exposed regional tensions and led to the rioting.
The Nigerian turmoil heightens supply worries concerning Libya, where an uprising against leader Moammar Gadhafi has slowed oil exports to a trickle.
Nigeria’s oil is “a suitable substitute for Libyan oil,” Commerzbank analysts said in a client note.
“If production losses occurred in Nigeria as well, the result would be a shortage of high-quality oil, which would benefit Brent in particular.”