Oil hovers below $79 amid strong Asian demand

[November 17, 2009]  SINGAPORE (AP) -- Oil prices hovered below $79 a barrel Tuesday in Asia as investors look to crude demand growth in Asia next year to offset a sluggish U.S. economy.

Benchmark crude for December delivery was down 45 cents to $78.45 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $2.55 to settle at $78.90 on Monday.

Traders are trying to anticipate the strength of the global economic recovery and how much crude demand may grow during the next 12 months.

The International Energy Agency, which advises 28 member countries on energy policy, expects crude demand to grow next year, led by emerging economies such as China and India while developed countries stagnant.

"OECD demand will be almost flat, so the increase will come mainly from emerging economies, which account for a little less than half of total global demand," said Nobuo Tanaka, the group's executive director in an interview in Singapore.

Nobuo warned that if oil prices, which are up from $32 in December, continue to rise, high energy costs could undermine the global recovery.

Some analysts expect stronger demand and a weakening U.S. dollar will help push prices higher.

"I think oil fundamentals will tighten and we'll retain the bull market," said Alan Plaugmann, a commodities analyst with Saxo Capital Markets in Singapore.

Plaugmann said he expects crude to reach $100 a barrel during the second or third quarter next year.

In other Nymex trading, heating oil fell 0.70 cent to $2.03 a gallon. Gasoline for December delivery dropped 1.29 cents to $1.97 a gallon. Natural gas for December delivery was steady at $4.61 per 1,000 cubic feet.

In London, Brent crude for December delivery fell 41 cents to $78.37 on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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