Oil holds above $61 on positive US Fed news

[July 16, 2009]  SINGAPORE (AP) -- Oil prices hovered above $61 a barrel Thursday in Asia after a more positive economic outlook from the U.S. central bank buoyed investor confidence.

Benchmark crude for August delivery was down 29 cents to $61.25 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract added $2.02 to settle at $61.54.

Oil surged Wednesday on signs from the Federal Reserve that the U.S. economy may be performing better than expected.

The Fed said industrial companies cut production far less in June than they had in previous months, and the central bank's minutes from its meeting last month showed it now expects the economy to contract at a slower pace than previously thought.

Oil had dropped to $58.78 a barrel last week from $73.38 on June 30 on investor concern that the global economy will emerge from recession slower than expected.

"The degree of short-run panic needed to stay below $60 has to be very considerable," Barclay's Capital said in a weekly energy report. "The situation would have to be weakening to a significant degree. That does not appear to be happening."

Stock investors, inspired by the Fed news and an upbeat outlook from chip maker Intel Corp., sent the Dow Jones industrial average up 3.1 percent on Wednesday.

Meanwhile, signs of weak U.S. crude demand weighed on prices. The Energy Information Administration said Wednesday that the country's supply of crude oil dropped more than expected last week, falling by 2.8 million barrels.

Inventories have dropped 13.2 million barrels during the last four weeks.

In other Nymex trading, gasoline for August delivery was steady at $1.70 a gallon and heating oil held at $1.58. Natural gas for August delivery rose 2.1 cents to $3.30 per 1,000 cubic feet.

In London, Brent prices fell 39 cents to $62.70 a barrel on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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