Oil rises above US$73 on Greek bailout hopes

Oil rose to settle more than 2 percent higher on Tuesday, buoyed by a weaker US dollar, gains on Wall Street, and a storm approaching the US Northeast.

US crude prices for March delivery rose $1.86 to settle at $73.75 a barrel, after hitting an intra-day high of $74.15. At the end of last week, prices briefly dipped below $70 a barrel to the lowest level since mid-December.

ICE Brent crude settled at $72.13, up $2.02.

The US dollar slipped from an 8-½ month high against the euro on Tuesday after reports of an aid plan for the struggling Greek economy.

"The bottom line is that the dollar had been getting stronger on concern over Greece, Portugal, Spain and now that it looks like something is going to be done to take care of those problems, the dollar sold off today and the stock market rallied,'' said Peter Beutel, president, Cameron Hanover, New Canaan, Connecticut.

Oil tends to rise when the dollar falls, making crude and petroleum products cheaper for nondollar buyers. Weakness in the dollar also encourages investors to move into more tangible investments such as commodities.

Although Germany denied reports that a decision had already been made to extend an aid package to Greece, the S&P 500 remained up about 1.6 percent in by mid-afternoon and the Dow was up 1.9 percent.

Traders look to equity markets for signs of a broader economic recovery which could revive flagging oil demand.

Heating oil futures led the oil complex gains on Tuesday as snowy conditions in the US Northeast, the world's top heating oil consumer, was expected to boost demand for the fuel.

The snowstorm, the second to hit the US East Coast in the past week, shut US government offices in Washington for the second day on Tuesday.

Heating oil demand is expected to be 7.6 percent above normal this week, the National Weather Service said on Monday.

"The cold weather and the uncertainty of whether people will be able to make it to work lent a little bit of urgency to some of the short-covering today,'' Cameron Hanover's Beutel said.

IRAN SANCTIONS

Geopolitical tensions over Iran's nuclear program also helped to underpin oil prices, analysts said.

The United States on Tuesday called for a UN sanctions resolution on Iran within weeks after Iran announced that work had begun to make higher-grade nuclear fuel.

The Islamic Republic denies its program has military aims.

Sanctions against Iran could prompt the nation to retaliate by reducing crude oil output or blocking exports traveling through the Strait of Hormuz, through which some 40 percent of the world's globally traded oil passes.

Continuing problems with militants in oil-producing Nigeria also contributed to crude oil gains.

The market will later look to the release of the weekly US oil inventory data from the American Petroleum Institute and the Energy Information Administration.

The API data due out at 4.30pm EST (2130 GMT) may provide clues about the pace of fuel demand recovery. The EIA said Tuesday its weekly data, normally released on Wednesdays at 10:30 a.m. EST, will be delayed until Friday due to the snowstorm blanketing the US capital.

US crude oil inventories likely rose last week by 1.5 million barrels and distillates fell 1.9 million barrels, a Reuters poll of 16 analysts showed Tuesday.

- Reuters