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Oil rises above $75 as traders eye stocks, dollar

Oil prices broke above $75 a barrel Thursday as traders looked for guidance from stock and currency markets amid a muddled crude demand outlook.

By early afternoon in Europe, benchmark crude for March delivery was up 73 cents at $75.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 77 cents to settle at $74.52 on Wednesday.

Oil has zigzagged recently — jumping about 7 percent since touching $69.59 a barrel on Friday after falling from $84 last month — as investors struggle to forecast crude demand amid a sluggish global economy.

Traders have instead been eyeing equity markets and the U.S. dollar. Most Asian and European stock markets rose Thursday while the euro strengthened to $1.3745 from $1.3731 on Wednesday.

Investors often buy commodities such as oil as a hedge against inflation, and a weaker dollar makes crude cheaper for traders holding other currencies.

"We have consistently emphasized a continued weak pace of demand beyond the emerging economies," Galena, Illinois-based Ritterbusch and Associates said in a report. "Extreme price volatility could be expected and a run at last week's highs at the $78 area is certainly possible."

"But, from a longer term view, we still expect fresh lows as we leave open the possibility of a strengthening dollar to new highs."

Supporting prices was the latest monthly report from the Paris-based International Energy Agency, which revised slightly higher its forecast for global oil demand in 2010, from a daily 85.3 million barrels to 85.5 million barrels.

In other Nymex trading in March contracts, heating oil rose 2.23 cents to $1.9692 a gallon, and gasoline added 1.43 cents to $1.9433 a gallon. Natural gas gained 8.7 cents to $5.379 per 1,000 cubic feet.

In London, Brent crude was up 94 cents at $73.48 on the ICE futures exchange.

Associated Press writer Alex Kennedy in Singapore contributed to this report.