Oil hovers above $78 amid mixed crude demand signs

[February 26, 2010]  MADRID (AP) -- Oil prices hovered above $78 a barrel Friday amid a weaker dollar and mixed signals about global crude demand.

By early afternoon in Europe, benchmark crude for April delivery was up 14 cents to $78.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.83 to settle at $78.17.

Oil prices have bobbed between $70 and $80 for most of the last six months as investors mull growing crude demand in developing countries such as China offset by flagging consumption in developed countries.

Even a cold winter in the U.S. has failed to boost demand for heating oil.

"The absence of any sustained seasonal draw in heating oil inventories is still striking," Barclays Capital said in a report. "The inventory overhang remains stubbornly high."

Crude prices were bolstered Friday by a weaker U.S. dollar, as dollar-based commodities such as oil become cheaper for international investors when the dollar falls.

The euro rose to $1.3591 in noon European trade from $1.3545 late Thursday in New York, while the British pound advanced to $1.5274 from $1.5246.

"The oil fundamentals do not warrant a move of WTI above $85 a barrel but the exogenous markets (equities, Dollar Index) remain an important input into the constitution of the current oil prices," said Olivier Jakob of Petromatrix in Switzerland, adding Friday the market would be watching closely the release of revised second-quarter U.S. GDP figures, consumer confidence data, and January existing home sales.

China's rising energy use is providing one of the few positive signs for oil prices.

"Chinese demand is, once again, the most promising factor in the markets," said JBC Energy in Vienna. "We see Chinese crude oil imports reaching almost 4.4 million barrel a day this year, another step to the 8 million barrel a day of crude imports which we project for 2020."

In other Nymex trading in March contracts, heating oil rose 0.88 cent to $1.9950 a gallon, while gasoline rose 1.12 cents to $2.0482 a gallon. Natural gas prices gained 3.4 cents to $4.801 per 1,000 cubic feet.

In London, Brent crude was up 7 cents at $76.36 on the ICE futures exchange.

[Associated Press; By PABLO GORONDI]

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

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