Oil prices advance on improved US data

24th August 2011, Comments 0 comments

World oil prices rose Wednesday on improved economic data from the United States, while traders also monitored the latest unrest in Libya.

Brent North Sea crude for delivery in October jumped $1.45 to $110.76 a barrel in late London deals.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for October, gained 48 cents to $85.92.

Prices, which were rising gently, shot higher as official data showed new orders for US durable goods rebounded sharply in July from a June dip, boosted by a surge in aircraft orders.

Orders for durable goods, manufactured items expected to last several years, leaped 4.0 percent, more than wiping out a 1.3 percent decline in June, the Commerce Department said.

Oil futures were also supported by data showing that crude stockpiles slumped 2.2 million barrels last week in the United States.

Prices had already risen on Tuesday, lifted by gains across financial markets on hopes of new US economic stimulus, and as traders tracked the Libyan crisis.

Libyan rebels hunted for Moamer Kadhafi and battled remnants of his forces Wednesday, as the defiant strongman boasted he had walked around Tripoli and urged residents to cleanse the capital of "rats."

The oil market was also focused on whether Federal Reserve chief Ben Bernanke would announce new stimulus measures to boost the US economy at a meeting of central bankers later this week.

Bernanke gives a crucial speech on Friday, with markets suggesting he could unveil a third round of Quantitative Easing (QE3) -- essentially a fresh move by the US central bank to pump up the slowing economy with newly-created money.

"A possible QE3 and the developments in Libya will be the main determents of oil prices in the coming weeks," said DnB NOR Markets analyst Torbjorn Kjus.

SEB Commodity Research analyst Filip Petersson said oil prices could drop temporarily should the Libya crisis ease -- and if Kadhafi was caught by rebel forces in the oil-producing African nation.

"Bearish influences could come from Libya -- e.g. if Kadhafi is caught -- but these are likely to be short lived as the market is starting to realize that Libya is highly unlikely to be back at pre-war capacity anytime soon," he said.

On Monday, as news broke that Kadhafi's rule could soon end, Brent oil prices fell to below $106.

But the contract rebounded after initial euphoria that Libyan oil production would return to pre-revolt levels evaporated as it was evident the country's facilities would take some time to get back online.

Brent is more affected than WTI by the situation in Libya as it competes directly with Libyan crude in the European markets.

Around 85 percent of Libyan oil output was exported to Europe until the revolt slashed the country's production six months ago.

Europe's refiners have struggled to replace Libya's highly valued light crude, sending prices soaring in the first six months of the year.


© 2011 AFP

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