By Grant Smith May 7 (Bloomberg) -- Crude oil rose, snapping three days of declines, as the dollar weakened versus the euro and on speculation this week’s 10 percent fall may have been excessive. Futures are still heading for their biggest drop since July on concerns Europe’s debt crisis will derail the economic recovery. Prices touched an 11-week low of $74.58 a barrel in New York yesterday. U.S. inventories of gasoline are 7.6 percent above their seasonal norm as the country’s peak driving season approaches, according to the Energy Department. “The downward movement of the last two to three days was fueled by concerns on the economic situation, but the fundamentals haven’t changed so today we’re seeing a recovery,” said Alexandra Kogelnig, a consultant with JBC Energy GmbH in Vienna. “Prices shouldn’t fall much below $80 as demand is recovering, and you need a certain price level.” Crude oil for June delivery traded at $77.75 a barrel, 64 cents higher in electronic trading on the New York Mercantile Exchange as of 11:22 a.m. London time. Brent crude oil for June settlement was at $80.43, up 60 cents on the London-based ICE Futures exchange. Oil settled at an 11-week low of $77.11 in New York yesterday after the euro fell against the dollar and the Dow Jones Industrial Average lost almost 1,000 points, a 9.2 percent plunge that was the biggest intraday percentage loss since 1987. The dollar was at $1.2752 per euro as of 11:21 a.m. London time, compared with $1.2619 in New York yesterday. “A small bubble has burst,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “It’s not a catastrophe, but market participants are nervous that the problems in Greece may be repeated in Portugal or Spain. It’s not about fundamentals now, oil is being driven by capital markets.” A 110 billion-euro ($140 billion) aid package to avoid a default by Greece has failed to prevent bond yields from rising, driving up borrowing costs for countries including Spain and Portugal. Moody’s Investors Service yesterday placed Portugal on review for a possible downgrade. U.S. Jobs The U.S., the world’s biggest economy, probably added 190,000 jobs in April, the most in three years, according to the median estimate from 84 economists surveyed by Bloomberg News before a government report today. The nation’s gasoline inventories rose 1.26 million barrels to 224.9 million barrels, a May 5 report from the Energy Department report showed. “The non-farm payrolls, if as expected, should trump the euro-zone woes,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “There is a greater possibility for U.S. demand gains than euro-zone demand losses. The euro area is a bit of a dead zone for oil demand.” Oil found support at price levels noted by traders using technical analysis. Crude reached a low today of $76.68 a barrel, close to the 200-day moving average of $76.43. Prices may also trade above $76.24 a barrel, the 61.8 percent Fibonacci retracement from the low of Feb. 5 to the May 3 high of $87.15, said Mitsubishi’s Nunan. “Both of those should be strong support levels,” he said. -- With assistance from Christian Schmollinger in Singapore. Editors: John Buckley, Raj Rajendran To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net

Source