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Oil rises above $78 in Asia on bargain hunting

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KUALA LUMPUR, Malaysia (AP) — Oil prices rose above $78 a barrel Tuesday in Asia, spurred by bargain hunting amid a weaker dollar and after gains in European shares.

Benchmark crude for February delivery was up 35 cents to $78.35 a barrel in electronic trading at early afternoon Kuala Lumpur time on the New York Mercantile Exchange. On Monday, the contract fell to as low as $77.07 before settling at $78 in European trade. The U.S. markets were closed Monday for the Martin Luther King public holiday.

“A combination of investors looking at prices approaching $77 as a buy opportunity and positive European equities performance have caused a turnaround in oil,” said Victor Shum, energy analyst with consultancy Purvin & Gertz in Singapore.

European stock markets rose Monday amid speculation of a pickup in corporate dealmaking.

Shum said a weaker dollar Tuesday also boosted oil, making crude priced in dollars cheaper for investors holding those currencies. The euro rose to $1.4395 from $1.4380 Monday and the dollar fell to 90.40 yen from 90.73 yen.

However, he said oil prices are likely to stay rangebound while waiting for cues from upcoming fourth quarter corporate earnings in the U.S. So far, earnings have been mixed, with better-than-expected earnings from the likes of Intel Corp. offset by disappointments elsewhere, most notably Alcoa Inc.

Banks will be in the spotlight especially after U.S. stocks fell 1 percent on Friday — the Dow Jones industrial average suffered its worst day of the year so far — as JP Morgan Chase & Co. offered a cautious earnings guidance even though it reported a fairly strong set of results.

In other Nymex trading in February contracts, heating oil fell 0.29 cent to $2.04 a gallon while gasoline was up 0.3 cent at $2.05 a gallon. Natural gas futures shed 10 cents to $5.59 per 1,000 cubic feet.

In London, Brent crude for March delivery added 1 cent to $77.11 a barrel on the ICE Futures exchange.