Oil prices rebound slightly

11th May 2010, Comments 0 comments

World oil prices rebounded somewhat on Tuesday, reversing earlier losses on bargain-hunting, as traders continued to assess the market impact of the EU-IMF eurozone bailout plan.

New York's main contract, light sweet crude for June delivery, added 25 cents to 77.05 dollars a barrel, having closed up 1.69 dollars on Monday.

Brent North Sea crude for June rose 35 cents to 80.47 dollars a barrel in late afternoon London trade.

Oil fell in earlier trade as euphoria over a massive eurozone bailout gave way to doubt over countries' ability to reduce their deficits, analysts said.

"The market's been very oversold, and down around 75 dollars a barrel it started to look like decent value," said BNP Paribas broker Tom Bentz, cited by Dow Jones Newswires.

Europe's main stock exchanges closed mixed on Tuesday, with some recovering from early losses one day after the EU rescue plan had sparked massive gains.

Crude futures had also surged on Monday, winning 1.69 dollars in New York, after a one-trillion-dollar EU-IMF eurozone rescue plan eased market concerns over the European debt crisis, dealers said.

"Despite the agreed EU package to bail out the debt-laden European countries, fears of sovereign risk in the region remain and sentiment remains cautious," noted Barclays Capital analyst Amrita Sen.

Meanwhile, the OPEC oil producers' cartel on Tuesday held steady its forecast for modest growth in world oil demand this year, noting uncertainty about the global economic outlook.

"Although the economic recovery shows signs of improving momentum, important risks remain that could impact demand growth expectations for this year," the Organization of Petroleum Exporting Countries (OPEC) said in its May report.

"The world oil demand forecast for 2010 will mostly depend" on the performance of the US economy, the report said.

"Should US oil demand weaken slightly and perform less than expected during the peak summer consumption season, then total world oil demand will be less than the current estimate."

The cartel said it was expecting world oil demand growth to grow by 0.9 million barrels per day (bpd) or 1.1 percent to average 85.4 million bpd for 2010. That was almost unchanged from the previous report.

"The more cautious sentiment about the continued pace of the recovery has also been reflected in oil price volatility," OPEC said.

US benchmark crude rose to more than 86 dollars per barrel before falling more than 10 dollars in three days last week.

"This strong volatility came despite the fact that crude fundamentals remain relatively unchanged and thus highlight the continued impact of financial market sentiment on crude oil prices," it said, pointing to Greece as an uncertainty factor.

"OPEC will continue to closely monitor the market, awaiting further signs that the positive momentum is broadening across all major regions."

Traders will focus Wednesday on the latest snapshot of crude oil inventories in the United States, which is the world's biggest energy consuming nation.

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© 2010 AFP

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