Oil prices near $48 a barrel as dollar falls

The falling dollar, which makes commodities like oil more attractive, outweighed a new report from the International Energy Agency, which said energy demand is sliding sharply.

Crude prices have spiked ahead of next week's meeting of OPEC, which is expected to slash production.

"Probably the biggest factor right now is financials," said Phil Flynn, an analyst with Alaron Trading Corp. "The market is worried that all these bailouts ... means we're going to be printing a lot more money, which makes the dollar weaker. That's really supporting the price."

Analysts cautioned reading too much into oil's rally. The price is up nearly 18 percent from last Friday's settlement price. After all, you don't have to look far to be reminded of the global economic downturn and its effect on crude consumption.

Paris-based IEA said Thursday that global oil demand will shrink this year for the first time since 1983. The IEA cut its forecast for global oil demand in 2008 by 350,000 barrels a day to 85.8 million barrels a day, down 0.2 percent from 2007.

The IEA also cut its forecast for global oil demand in 2009, saying it would increase by just 0.5 percent next year, to 86.3 million barrels a day. That's 200,000 barrels a day less than its estimate last month.

"It's premature to say the lows have been placed," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "If they don't put an auto package together soon, if the stock market gets slammed 300 or 400 points, we could shrug off the currency factor pretty quickly."

Light, sweet crude for January delivery rose $4.46 to settle at $47.98 a barrel in trading on the New York Mercantile Exchange, after rising to near $49 earlier in the session.

Prices at the pump, however, continue to plummet. Gasoline prices fell 1.9 cents overnight to a national average of $1.664 per gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That's 55.6 cents a gallon below what it was a month ago and $1.326 below where it was a year ago.