Oil rises above 70 dollars

Wednesday July 01, 2009

SINGAPORE: Oil rebounded in Asian trade Wednesday after falling overnight on figures showing declining consumer confidence in the United States, the world's biggest energy user, analysts said.

New York's main contract, light sweet crude for August delivery rose 66 cents to 70.55 dollars.

Brent North Sea crude for August delivery advanced 75 cents to 70.05 dollars.

Analysts expect the rebound in crude prices, coming mainly on the back of investors looking for an alternative to equities, to be temporary amid fresh worries about US energy demand.

"Markets have paused for breath over the past month as risk appetite has begun to show signs of waning," analysts from London-based Capital Economics research house said in a report.

"We had not expected investors to lose their enthusiasm quite so soon.... We suspect that investors will be ultimately disappointed by the strength of the economic recovery, which is likely to feed back into greater risk aversion later in the year."

It said commodities including oil "have generally continued to do well, although the rally is now running out of steam."

Figures released Tuesday by the Conference Board, a business research group, showed that US consumer confidence sank in June as Americans fretted about the recession and vanishing jobs.

The Conference Board's consumer confidence index retreated to 49.3 points in June from a revised 54.8 in May, an eight-month high. Most analysts expected a much stronger reading of 55.3 points.

"The decline in the present situation index, caused by a less favourable assessment of business conditions and employment, continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak," said Lynn Franco, research director of the Conference Board.

Oil prices have increased dramatically -- by 40 percent, or more than 20 dollars -- in the second quarter on rising confidence that the global slump is easing.

It closed at 49.66 dollars on March 31, which was the last day of the first quarter.



(AFP)