Oil edges ahead amid stubborn Italy debt woes

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World oil prices drifted higher on Thursday but the market remained plagued by persistent doubts over the eurozone's debt crisis and in particular the plight of Italy, traders said.

Brent North Sea crude for delivery in December added 16 cents to $112.47 a barrel in London afternoon trade.

New York's main contract, light sweet crude for December, gained 90 cents to $96.64, lifted by indications of strengthening demand in top oil consumer the United States.

"Crude prices have gathered some modest upside momentum to recover some of yesterday's losses as equities pare losses and Italian debt yields come off their record highs," said Myrto Sokou, an analyst at Sucden brokers.

"The darkening state of affairs in the single currency region and lack of clarity of proposed remedies ... is likely to exert significant downside pressure on crude prices until the prospect of genuine improvement emerges."

Oil prices on Wednesday as the market fretted over heightened economic turmoil in Europe and IMF chief Christine Lagarde's warning of a potential "downward spiral" in the global economy.

Italian borrowing rates soared above 7.0 percent on Wednesday, touching levels considered too high for Italy to be able to fund its public deficit over the longer term.

Traders on Thursday also reacted to news that the International Energy Agency had cut its oil demand forecast.

The IEA revised down expected global oil demand slightly by 70,000 barrels per day this year and by 20,000 barrels next year after unexpectedly low third-quarter demand data from the United States, China and Japan.

It also warned that the debt crisis, tensions over Iran, flagging growth and the approaching northern hemisphere winter were proving difficult for the oil market to read clearly.

© 2011 AFP

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