Oil prices rebound

2nd June 2010, Comments 0 comments

World oil prices bounced higher on Wednesday, reversing earlier losses in jittery trade on the back of improving global financial markets, traders said.

New York's main contract, light sweet crude for delivery in July, rose 1.04 dollars to 73.62 dollars a barrel.

London's Brent North Sea crude for July gained 1.65 dollars to 74.36 dollars.

"Jittery trading (in the oil market) is here to stay for now as we continue to track the broader markets and swings in global risk sentiment," said VTB Capital analyst Andrey Kryuchenkov.

Wall Street rebounded on Wednesday and European equities clawed back some of their losses as investors went bargain hunting for shares that had fallen sharply on eurozone debt and global economic recovery concerns.

The Dow Jones Industrial Average rose 0.31 percent at the open, one day after tumbling on fears of new European bank problems and a slowdown in Chinese growth, as well as the mounting cost of the Gulf of Mexico oil spill disaster.

Meanwhile, US pending home sales rose for the third month running in April as home buyers rushed to sign contracts before the end of a government tax credit.

The National Association of Realtors (NAR) said pending home sales rose 6.0 percent in April, well above forecasts for a 4.3 percent rise.

Traders will have to wait until Thursday for the weekly snapshot of energy inventories in the United States, the world's biggest energy consuming nation.

The report, normally published on Wednesday, was delayed by the US Memorial Day public holiday on Monday.

Oil drifted lower earlier Wednesday, with sentiment dampened by fears that the eurozone debt and deficit crisis could derail the global economic recovery and dent energy demand.

"The driver for oil prices at the moment is economic recovery -- there's some evidence of it in the US and UK, but overall the concern is the eurozone debt crisis," said CMC Markets analyst Michael Hewson.

"We're looking at pared-back growth forecasts for the eurozone and where this will lead for energy demand."

Market sentiment was hit this week after the European Central Bank suggested that eurozone banks might have to reduce the value of their assets by a total of 195 billion euros by 2011.

The ECB said in its twice-yearly Financial Stability Review that banks faced several challenges, including exposure to a weakening commercial real estate market, hundreds of billions of euros in bad debts, and a possible competition for refinancing with governments with swollen sovereign debt.

Oil fell sharply on Tuesday after a series of sluggish European and Chinese economic indicators sparked concerns about energy demand.


© 2010 AFP

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