Oil rises above $57 amid weak crude demand

[May 18, 2009]  LONDON (AP) -- Oil prices rose above $57 a barrel Monday as traders considered whether last week's push to above $60 was justified amid signs of weak crude demand. Attacks on oil facilities in Nigeria helped support prices.

Benchmark crude for June delivery was up 89 cents to $57.23 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. On Friday, the contract dropped $2.28 to settle at $56.34.

In London, Brent prices rose $1.13 to $57.11 a barrel on the ICE Futures exchange.

With the June Nymex contract expiring Tuesday, the market was also keeping close tabs on the July contract, which was up 70 cents to $57.70.

A series of lower forecasts for world oil consumption last week undercut investor optimism that a global economic recovery was imminent. The International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries all cut crude demand expectations.

The outlook for the U.S. economy also turned darker last week after dismal news on unemployment and housing were reported. Retail sales fell unexpectedly in April.

"The fundamentals of oil remain quite gloomy," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "The retail sales results show the U.S. economy is still struggling."

Crude has risen from below $35 a barrel in March, boosting gasoline and other oil product prices just as the U.S. economy is fighting to emerge from a severe recession. High oil prices over the last two years, which surged to a record $147 a barrel in July, helped undermine consumer demand and plunge the world into its worst economic slowdown since World War II.

"When oil goes to $60 while major economies are still struggling, those high prices will simply slow down an economic recovery," Shum said.

In Nigeria, Africa's leading oil producer, the main militant group said Sunday it had destroyed two oil pipelines in the southern Niger Delta, the latest attack amid the worst outbreak of violence to hit the region in months.

"We will keep a very strong watch on Nigeria this week," said Olivier Jakob of Petromatrix in Switzerland. "What we are currently monitoring is definitely on a different scale than previous events."

In other Nymex trading, gasoline for June delivery rose 1.60 cents to $1.6966 a gallon and heating oil gained 1.13 cents to $1.4301 a gallon. Natural gas for June delivery was unchanged at $4.098 per 1,000 cubic feet.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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