Oil price rebound from sharp falls

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World oil prices firmed on Thursday, after recent sharp falls, as traders absorbed positive economic data and the weak dollar, and shrugged off Federal Reserve chief Ben Bernanke's gloomy outlook.

New York's main contract, light sweet crude for delivery in September, gained 44 cents to 77.00 dollars a barrel.

Brent North Sea crude for September added 31 cents to 75.68 dollars in early afternoon deals.

"Crude oil prices rebounded and traded around 77-dollar area, supported by a weakening US dollar and a quick recovery in the equity markets after better-than-expected economic data from the eurozone and UK," said Sucden analyst Myrto Sokou.

On Thursday, a leading indicator of economic activity, the purchasing managers' index for the 16-nation eurozone, accelerated for the first time in three months in July.

The latest purchasing managers' index (PMI) compiled by data and research group Markit rose to 56.7 points, from 56.0 in June. Any score above the 50-point line indicates economic growth.

Traders will focus later on major company results, weekly jobless claims data and existing homes sales in the United States.

"It is a busy and quite interesting day for economic figures and corporate earning results, with focus on Microsoft and American Express earnings," added Sokou.

"It seems that investors' sentiment has slightly improved after stronger-than-expected eurozone economic data, while the current weakening US dollar provides further support to the market.

"However, investors might remain cautious and wait for clarification from the eurozone's banks stress tests tomorrow that could give some direction to the energy market."

The weak US unit makes dollar-priced oil cheaper for buyers using stronger currencies, and therefore tends to stimulate demand.

Meanwhile on Friday, authorities will publish the results of "stress tests" done by national regulators on 91 European Union institutions that represent 65 percent of the EU banking sector.

The tests are designed to assess the capacity of major European lenders to withstand economic or financial crises.

Oil fell on Wednesday after Bernanke warned that the outlook for the world's largest economy remained "unusually uncertain" but said the US central bank could step in to bolster the recovery.

In Senate testimony, Bernanke said the economy would see only "moderate growth, a gradual decline in the unemployment rate, and subdued inflation over the next several years."

Oil also sank on Wednesday amid an unexpected surge in crude reserves in the United States, indicating weaker demand in the key energy-consuming nation.

The market was shocked by the latest data Wednesday from the US Department of Energy (DoE) showing that American crude oil reserves rising 400,000 barrels in the week ending July 16. The market had expected a 1.3-million-barrel drop.

© 2010 AFP

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