Oil up to near $76 in Europe amid economic worries

[August 17, 2010]  LONDON (AP) -- Oil prices edged up for the first time in five days Tuesday as rallying stock markets in Europe and a weaker dollar masked concerns of a slowing global economic recovery that could dent demand for fuel.

By early afternoon in Europe, benchmark crude for September delivery was up 72 cents to $75.96 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 15 cents to settle at $75.24 a barrel on Monday.

Oil has dropped from above $81 a barrel early last week amid resurgent fears that the world economy may not grow as much as expected in the second half.

"What has been driving prices in the past week has been the perception that the world is going to have a major slide down. At the moment, that is perception but not fact," said Nick Raffan, head of mining and resources research at consultancy Fat Prophets in Sydney.

Japan's surprisingly low economic growth in the second quarter, coupled with a disappointing regional manufacturing report in the U.S. dampened market sentiment. Indicators from China, the world's biggest energy consumer, also show growth is slowing as Beijing clamps down on a credit splurge.

But Raffan said industrial output remained strong in Europe and other parts of the world. Despite expectations of a slowdown, he said the global economy remained robust and would not reverse into the red, with oil likely to remain in volatile trade between $70 and $80 a barrel in the short to medium-term.

A weaker dollar helped lift prices by making crude cheaper for investors holding other currencies. The euro was up to $1.2874 in European trading on Tuesday from $1.2809 late Monday in New York.

Stock indexes in Europe were all higher, led by gains of more than 1 percent in Germany and London.

"Today, it seems that the market sentiment has strongly improved," said a report from Sucden Research in London. "However, trading conditions are likely to remain quite volatile and nervous in the energy market, as uncertainty remains on the table."

In other Nymex trading in September contracts, heating oil added 2.56 cents to $2.0144 a gallon and gasoline rose 2.66 cents to $1.9509 a gallon. Natural gas was higher by 1.4 cent at $4.242 per 1,000 cubic feet on the Nymex.

In London, Brent crude was up $1.04 at $76.67 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

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