Oil prices edge up after sharp run lower

6th May 2010, Comments 0 comments

Oil prices nudged higher on Thursday after recent sharp losses but gains were capped by a stronger dollar, analysts said.

New York's main contract, light sweet crude for delivery in June, rose eight cents to 80.05 dollars a barrel.

Brent North Sea crude for June climbed four cents to 82.71 dollars in midday London trade.

"Crude oil prices struggled... as the euro extended losses to hit a 14-month low against the dollar," said Sucden Financial Research analyst Myrto Sokou.

"The strengthening US dollar... dampened investors' sentiment."

A stronger US unit makes dollar-denominated oil more expensive for holders of rival currencies, such as the euro.

Risk-averse investors on Thursday continued to dump the European currency in favour of the dollar, which is seen as a safe haven asset during financial turmoil.

"We continue to expect the euro to decline further in the short to medium term," said Dariusz Kowalczyk, chief investment strategist with SJS Markets.

He said commodities including crude were "hit by risk aversion and the dollar's strength".

The euro dived to the lowest level against the dollar for more than one year on Thursday as deadly protests in debt-plagued Greece cast a shadow over the future of the eurozone and the single currency, dealers said.

The shared European unit hit 1.2737 dollars -- a level last seen on March 12, 2009, before recovering slightly.

Oil prices had meanwhile slumped since Monday when they touched 87.15 dollars -- the highest level since October 2008.

The market was also being weighed down by rising oil inventories in the United States, indicating weakening demand in the world's largest energy consuming nation.

Data released Wednesday by the US Department of Energy showed crude stockpiles soared by 2.8 million barrels last week.

That was far greater than market expectations for a gain of around 700,000 barrels, according to analysts.

Elsewhere on Thursday, coastal residents anxiously awaited the outcome of efforts to contain the Gulf of Mexico oil spill with a giant dome-like structure and limit damage from what is becoming an environmental catastrophe.

The Deepwater Horizon oil rig, operated by British energy firm BP and owned by US contractor Transocean, sank on April 22 -- two days after a massive explosion killed 11 workers.

Since the explosion, an estimated 2.5 million gallons of crude have spewed into the sea from a well below the rig.


© 2010 AFP

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