Oil hovers near $88 in Asia amid economic optimism

[December 03, 2010]  KUALA LUMPUR, Malaysia (AP) -- Oil prices hovered near $88 a barrel Friday in Asia, with losses tempered by hopes of strong growth in demand for crude and Europe's progress in containing its debt crisis.

Benchmark oil for January delivery was down 35 cents to $87.60 a barrel at late afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract rose $1.25 to settle at $88 a barrel on Thursday, just shy of the 2010 high of $88.29.

Signs the U.S. economy is gaining strength have spurred a rally on Wall Street this week, and that in turn drove oil prices up. U.S. manufacturing activity, retail sales and the housing market all improved. And while more Americans applied for unemployment benefits last week, the average over the past month fell to a two-year low.

Strong manufacturing data from China, a major crude importer, also lifted sentiment and turned attention away from European debt problems to the underlying strength of global oil demand, Barclays Capital said in a report.

"The momentum in global economic growth remains strong," it said. "Overall, the latest U.S. data remain consistent with our view of continued steady demand increases ahead."

Europe's progress on containing its debt crisis added to the optimism. The European Central Bank calmed markets after saying it would extend the availability of emergency loans and offer credit at a super-low rate through the first half of next year.

The European Union agreed on bailout loans for Ireland last weekend, the second country after Greece following soaring budget deficits. There are fears Portugal and Spain may have to follow suit.

Analysts said the crude market will take cues from monthly U.S. unemployment figures later Friday.

Ritterbusch and Associates foresaw rosy prospects for crude. It predicted prices could drift before hitting $90.50 a barrel in the near term. Goldman Sachs was even more sanguine, forecasting crude prices to hit an average $100 a barrel in 2011 and $110 in 2012.

In other Nymex trading in January contracts, heating oil fell 1 cent to $2.45 a gallon while gasoline shed 1 cent to $2.35. Natural gas fell 1.1 cent to $4.33 per 1,000 cubic feet

In London, Brent crude fell 18 cents to $90.51 a barrel on the ICE futures exchange.

[Associated Press; By EILEEN NG]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.