Oil prices edge above $73 as stocks recover

[August 28, 2009]  LONDON (AP) -- Oil prices edged above $73 on Friday, as stock market increases and corporate earnings reports suggested consumer demand may be slowly rising again. Gains were limited, however, by worries that a recovery may not be sustainable.

Benchmark crude for October delivery was up 64 cents to $73.13 a barrel by midday in European in electronic trading on the New York Mercantile Exchange. The contract Thursday added $1.06 to settle at $72.49 after tumbling from near $75 earlier in the week.

Good earnings from U.S. computer maker Dell, French cosmetics company L'Oreal SA and retailing giant Carrefour suggested household spending may be on the mend.

Still, analysts warned the outlook remains murky, as unemployment in the world's largest economies is expected to keep rising for months to come, industrial production is weak, and inventories remain high.

Some say the oil price is bound to fall in the weeks ahead, as earlier euphoria about the global economy emerging from recession gives way to doubts about how sustainable the rebound is.

"We have seen this strength (in the oil price) which reflected renewed confidence in the economy," said John Vautrain, energy analyst at consultancy Purvin & Gertz in Singapore. "But in the last week or so people are starting to say that the stock market is overbought and the data is not that good."

Reflecting the dire state of energy demand, natural gas prices slumped to their lowest level in seven years Thursday after the U.S. government reported that salt caverns, aquifers and other underground areas where it is stored are filling up. Levels of natural gas have been building because power-intense industries like manufacturing have cut back severely on production.

Existing weakness in demand will also be exacerbated by the seasonal drop in gasoline consumption when the U.S. summer driving season ends in a few weeks time.

In other Nymex trading, gasoline for September delivery was up 1.2 cents at $2.044 a gallon and heating oil rose 1.9 cents to $1.8780 a gallon.

In London, Brent crude was up 70 cents at $73.21.

[Associated Press; By CARLO PIOVANO]

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