Oil prices rise further on demand hopes

LONDON - Oil prices extended gains Friday on raised hopes of a better-than-expected recovery in energy demand, traders said.

By (AFP)

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Published: Fri 14 Aug 2009, 6:28 PM

Last updated: Thu 2 Apr 2015, 3:45 AM

Brent North Sea crude for delivery in September rose 30 cents to 73.78 dollars a barrel in morning London trade.

New York’s main contract, light sweet crude for September, edged up five cents to 70.57 dollars a barrel.

Despite prices rising Friday, one analyst said he expected a reverse of direction soon as current demand remains weak.

‘We remain very sceptical that any rally can be sustained, and we still favour the downside in the short term,’ said VTB Capital commodities analyst Andrey Kryuchenkov in London.

‘Brent should slip back to 72 dollars and eventually 70 dollars, once the euphoria subsides.’

Crude prices have been winning support since Thursday’s release of better-than-expected growth data on the 16-nation eurozone economy that gave hope of a stronger pick-up in crude demand than suggested by experts this week.

The eurozone’s GDP contracted a mere 0.1 percent in the second quarter after a 2.5 percent drop in the January-March period.

Germany and France, the eurozone’s two largest economies, both posted growth of 0.3 percent, surprising economists and officially confirming the end of the recession in the two countries.

Oil prices had also risen on Wednesday after the Federal Reserve said economic activity was ‘levelling out.’

The policymaking Federal Open Market Committee (FOMC) maintained ultra-low interest rates, but said it would gradually end a programme of Treasury bond purchases after completing a 300-billion-dollar scheme in October.

The US economy is the world’s largest energy consumer and an economic recovery is seen as key to boosting global oil demand after the recession.

However latest government data on US energy reserves showed oil demand remained weak. The US Department of Energy on Wednesday said crude inventories rose by 2.5 million barrels to 352 million barrels in the week ended August 7, more than triple the amount expected by analysts.

It was the third week running of higher crude stockpiles.

On Wednesday, the International Energy Agency gave a cool assessment of so-called ‘green shoots’ of economic growth, saying that oil demand was lagging behind inconclusive signs of global recovery from the economic crisis.

Demand this year would be far weaker than last year and an unexpectedly weak rally next year would fall far short of compensating for this, the IEA said.

The broad findings of the IEA report chimed with the overall assessment of the Organization of Petroleum Exporting Countries which reported Tuesday that world oil demand would decline slightly this year but begin to grow in 2010.

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