Oil rises close to 80 dollars on Tropical Storm concerns

23rd July 2010, Comments 0 comments

Oil prices rose to close to 80 dollars on Friday as Tropical Storm Bonnie swirled towards the Gulf of Mexico, and traders awaited European banking stress test results for hints on the economic outlook.

New York's main contract, light sweet crude for delivery in September, hit 79.60 dollars per barrel -- last seen on May 5 -- winning support also from the weak US currency. It later stood at 78.98, down 32 cents from Thursday's close.

London Brent North Sea crude for September meanwhile weakened by 36 cents to 77.46 dollars in early afternoon deals.

"The main focus has turned to Bonnie and the eurozone banks stress tests," said Sucden analyst Myrto Sokou in London.

The crude market had soared on Thursday as stock markets rallied on upbeat US company results, and as Tropical Storm Bonnie moved towards the oil-producing region of the Gulf of Mexico.

"If Bonnie continues to strengthen, continuing worries about a potential disruption of oil operations in the Gulf of Mexico, are likely to move crude oil prices higher to test the 80-dollar area," added Sokou.

The "stress test" results from the London-based Committee of European Banking Supervisors, due at 1600 GMT on Friday, should for a clearer picture of the global economic outlook.

The tests conducted by national regulators on 91 European Union institutions that represent 65 percent of the EU banking sector are designed to assess the capacity of major European lenders to withstand economic or financial crises.

Meanwhile, traders absorbed upbeat economic data in Britain and Germany that strengthened hopes of a sustained global economic recovery.

Official data showed that the British economy grew by a faster-than-expected 1.1 percent in the second quarter, the strongest pace since 2006, as the recovery took root.

And Germany's Ifo business confidence index for July showed the strongest rise for 20 years on Friday.

The European single currency climbed against the dollar in response to the strong German business confidence data.

A weaker greenback tends to boost dollar-priced oil because the commodity becomes cheaper for buyers using stronger currencies. In turn that tends to simulate demand and prices.

Wall Street stocks had rallied on Thursday as sentiment was boosted by forecast-busting corporate earnings from AT&T, Caterpillar and 3M.

And on Friday, leading US automaker Ford posted a 13 percent jump in net profits to 2.6 billion dollars in the second quarter of 2010, as sales soared.


© 2010 AFP

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