Oil rises spikes near 80 dollars on Tropical Storm concerns
Oil prices rallied close to 80 dollars on Friday as Tropical Storm Bonnie swirled towards the Gulf of Mexico but pulled back slightly as traders awaited stress test results on Europe's banks.
New York's main contract, light sweet crude for delivery in September, hit 79.60 dollars per barrel, a level last seen on May 5, winning support also from the weak US currency. It later stood at 79.03 dollars, down 27 cents from Thursday.
London Brent North Sea crude for September meanwhile weakened 20 cents to 77.62 dollars in late afternoon deals.
"The main focus has turned to Bonnie and the eurozone banks stress tests," said Sucden analyst Myrto Sokou in London.
The market 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.
Crews working on a huge oil spill were evacuated on Friday, prolonging the region's environmental and economic nightmare.
The cap in place for a week on the ruptured well will remain in place but efforts to complete relief wells for a permanent fix were set back by the evacuation as Tropical Storm Bonnie churned toward the area.
At 1200 GMT, Bonnie was some 130 kilometers (80 miles) south-east of Miami, Florida, packing sustained winds of 65 kilometers (40 miles) per hour.
The storm was moving at a fast clip of 31 kilometers (19 miles) per hour toward the Florida Straits and the Gulf of Mexico, the National Weather Service said.
"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," Sokou said.
"However, as the day progresses, the focus will switch to the release of the European banks' stress tests, while volatile conditions might weigh on the energy market."
The London-based Committee of European Banking Supervisors was due to publish banking "stress test" results at 1600 GMT on Friday, giving a clearer picture of their financial health.
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.
At the same time, traders absorbed upbeat economic data in Britain and Germany that lifted hopes of a sustained global economic recovery.
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 while Germany's Ifo business confidence index for July showed the strongest rise for 20 years.
The European single currency climbed against the dollar in response to the strong German business confidence data.
A weaker dollar tends to boost dollar-priced oil because the commodity becomes cheaper for buyers using stronger currencies, which in turn tends to encourage demand and lift prices.
© 2010 AFP