Crude oil rose today for the first time in three days, advancing above $71 a barrel as the dollar weakened against the euro, and before a report on fuel supplies in the US, the world's biggest energy consumer. Earlier on Monday, benchmark crude for July delivery had fallen to $70.62 a barrel on the New York Mercantile Exchange as the dollar gained strength.

The US energy department will probably say on Wednesday that crude stockpiles dropped two million barrels last week, according to Bloomberg. Oil lost two per cent on Monday, extending its decline from last week's seven-month high of $73.23 a barrel as a stronger dollar made commodities less appealing as a currency hedge.

Crude-oil supplies probably dropped 2 million barrels last week from 361.6 million barrels the previous week as refiners ramped up production and boosted stockpiles of gasoline and heating oil. Inventories are 11 per cent above the five-year average for this time of year, according to Bloomberg.

Brent crude for August delivery rose by $1.33, or 1.9 per cent, to $71.52 a barrel on London's ICE Futures Europe exchange. On Monday the contract lost $1.56, or 2.2 per cent, to $70.24 a barrel.

Energy prices, like some other commodities, had been rising fast on speculation that the US economy is recovering from its longest recession since World War II. But they reversed course late last week as worries surfaced over the recovery's durability.

Deora waffles on price hike
Amid the relatively high crude oil prices in the international market and losses being incurred by Indian oil marketing companies, petroleum and natural gas minister Murli Deora hinted on Monday that the government could ''review'' the prices of petrol and diesel. (See: Deora hints at fuel price hike)

''We are seriously concerned about the rise in crude oil prices. We have to look for solutions,'' Deora told reporters after a meeting with finance minister Pranab Mukherjee. ''There are many alternatives that are being looked at and review of prices could be one of them. But nothing has been decided as yet and there are discussions going on within the government over the plan of action.''

Deora added, ''The alternatives before us are raising petrol and diesel prices, asking the government to make up for revenue loss (of fuel retailers) through issuing oil bonds and upstream firms (like ONGC) chipping in. It could even be all of the three as has been the practice till now.''

State fuel retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum may together lose close to Rs.60,000 crore in revenues if they are forced to continue selling petrol, diesel, domestic LPG and kerosene at the current prices. Deora stayed mum on deregulation of petrol and diesel prices.