Oil prices rally, despite rising US crude inventories

24th November 2010, Comments 0 comments

Oil prices jumped on Wednesday, despite news of a surprise gain in US crude reserves, as traders reacted to a raft of positive economic data in the key energy-consuming nation.

Brent North Sea crude for delivery in January leapt 1.85 dollars to 85.10 dollars a barrel in London afternoon trade.

New York's main contract, light sweet crude for January, soared 1.73 dollars to 82.98 dollars per barrel.

The US government's Department of Energy announced Wednesday that US crude oil inventories rose by one million barrels in the week ending November 19.

That confounded market expectations for a heavy drop of 1.9 million in the key energy consuming nation.

However, crude futures were propelled higher as positive news on unemployment, consumer spending and wages bolstered belief that the US economic recovery was far from dead.

Claims for unemployment benefits fell more than expected last week, compounding a choppy, but steady downward trend seen in recent weeks.

The Labor Department said new claims had fallen to 407,000 in the week to 20 November, down 34,000 from the week before.

New claims have been stuck above 450,000 for most of the year, so the breakout was seen as evidence that sky-high unemployment may soon edge downward.

The oil market remains under pressure, meanwhile, amid stubborn fears over the impact of the eurozone crisis and simmering tensions on the Korean peninsula.

World financial markets have been rocked this week by eurozone debt worries and North Korea firing dozens of artillery shells onto a South Korean island on Tuesday, killing four people and triggering an exchange of fire.

"The oil market is under pressure, with crude oil prices consolidating around the 82 dollars-per-barrel area," said Sucden analyst Myrto Sokou.

She added: "Investors remain sceptical that Ireland will not be the last of the eurozone's financial instabilities while the main attention has switched to the fragilities of Portugal and Spain.

"It seems that the eurozone debt crisis has deepened, and in addition the political tensions in the Korean peninsula added further 'dust' in the uncertain geopolitical conditions."

"However, for the rest of the week, volumes might be light with choppy trading conditions due to the US Thanksgiving holiday (on Thursday)."

© 2010 AFP

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