Oil prices in renewed push higher

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World oil prices advanced on Wednesday as traders digested a eurozone bailout plan and the IEA's energy demand outlook, before the US government's weekly energy report.

New York's main contract, light sweet crude for June delivery, rose 30 cents to 76.67 dollars a barrel.

Brent North Sea crude for June added 90 cents to 81.39 dollars a barrel in midday London trade.

"Oil continues to consolidate after last week's dramatic sell-off," said VTB Capital analyst Andrey Kryuchenkov.

Crude futures had slumped by more than ten percent last week as traders fretted about contagion fears from the Greek debt crisis.

However, prices rallied on Monday on the back of a massive 750-bilion-euro EU-IMF financial rescue plan for debt-ridden eurozone countries.

The market turned mixed on Tuesday as enthusiasm waned for the bailout package and concern grew about Chinese inflation that could sap global economic growth.

"Market participants remain sceptical over the EU/IMF bailout package," noted Kryuchenkov.

"In any case, today the market is turning its attention back to fundamentals with the EIA reporting US fuel stockpiles in the week to 7 May."

The US government's Energy Information Administration will publish its weekly report later at 1430 GMT.

Market expectations are that US crude reserves increased by 800,000 barrels, according to analysts polled by Dow Jones Newswires.

Stockpiles of crude in the United States are closely watched because it is the world's biggest economy and the largest energy consuming nation.

In Paris on Wednesday, the IEA cut its projection for global oil demand this year in the face of public finance pressures in Europe and elsewhere that could drown economic recovery "in an ocean of public debt."

Worldwide oil demand is projected at 86.4 million barrels a day this year, up 1.9 percent from 2009 but 220 thousand barrels a day fewer than the International Energy Agency had previously estimated.

"The economic recovery is at risk of drowning in an ocean of public debt," the IEA said in its monthly report, adding that "downside risks remain a clear and present danger".

While current attention is riveted on Greece, "other large economies -- and not only in Europe -- face the increasingly pressing challenge of achieving an orderly fiscal consolidation in the next few months without jeopardising long-term growth."

Oil demand growth is expected to be "entirely" driven by emerging market and developing countries, notably in Asia, where economies are projected to expand this year by 6.4 percent, nearly three times as fast as in traditional industrialised nations.

The IEA, which seeks to coordinate energy policies among industrialised countries, also predicted that oil prices are likely to average 76.50 dollars a barrel in 2010.

And the agency warned that hastily crafted moves to regulate markets could trigger oil price volatility and said the recent oil rig disaster in the Gulf of Mexico should not lead to a ban on off-shore drilling.

© 2010 AFP

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