Oil prices hovered near $71 a barrel Wednesday after a weakening U.S. dollar sent crude soaring overnight and as an OPEC meeting was expected to announce no change in production levels.
By midday in Europe, benchmark crude for October delivery was down 6 cents to $71.04 a barrel in electronic trading on the New York Mercantile Exchange.
On Tuesday, the contract jumped $3.08 to settle at $71.10 as the dollar fell to a low for the year against the euro and gold prices surpassed $1,000 an ounce for the first time since February.
Some investors buy oil, gold and other commodities as a hedge against a weakening dollar and inflation.
The euro was modestly higher at $1.4495 in European trading while the British pound also gained slightly to $1.6508.
"People are selling dollars for higher-yielding currencies, and that's driving oil higher," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore.
"Keep an eye on the dollar and the $74 level," he said. "If oil breaks that, it could shoot to $80 or $85 in the short-term."
Investors will also be looking to the meeting of the Organization of Petroleum Exporting Countries, which produces about 40 percent of the world's output.
Kuwait's oil minister, Sheik Ahmed Al Abullah Al Sabah, said OPEC's markets monitoring committee would suggest to the 12-country group that oil output targets be held steady at the organization's Wednesday meeting in Vienna.
Saudi Arabian Oil Minister Ali Naimi said Tuesday that crude markets were "in good shape," boosting expectations OPEC will to stress compliance with output quotas instead of cutting production. Compliance with the output limits, which are designed to support prices, has been waning.
Analyst Olivier Jakob of Petromatrix in Switzerland said a report Thursday from the Paris-based International Energy Agency could show an increase in global oil demand.
That would provide some fundamental support for oil prices, which have been rising recently mostly on external factors such as stronger equity markets and the weak U.S. dollar.
In other Nymex trading, gasoline for October delivery was down 0.15 cent to $1.8274 a gallon while heating oil lost 0.23 cent to $1.7802 a gallon. Natural gas rose 0.2 cent to $2.809 per 1,000 cubic feet.
In London, Brent crude was down 9 cents to $69.33 on the ICE Futures exchange.