Oil back above 70 usd as fears over inflation, economic slowdown subside
LONDON (AFX) - Oil prices edged above 70 usd as commodities continued to regain lost ground after US data showing lower than expected wholesale inflation soothed fears about an economic slowdown.
At 11.39 am, July-dated Brent contracts were up 19 cents at 70.27 usd, having gained 63 cents to close at 70.08 usd yesterday. Meanwhile, June-dated US light crude futures were up 22 cents at 69.80 usd.
Prices rose yesterday after US data showed producer prices, excluding food and energy, rose less than expected last month, easing inflation worries and fuelling speculation the Fed might end its campaign of interest rate hikes.
Alexander Kervinio, analyst at SG CIB Commodities, said the market will be keeping a close eye on today's US consumer price data for further evidence the recent commodity rally has not fuelled inflation.
Fears rising inflation would spark a general economic slowdown lead to a massive selling spree across the commodities complex on Monday. The fears were exacerbated by concern high oil prices have dented demand.
The was underlined Friday by the International Energy Agency, which revised down its oil demand growth figures for 2006 by 220,000 bpd to 1.25 mln bpd, citing mild first quarter temperatures and the impact of high prices on demand.
'The IEA report triggered the sell off and fears over inflation and slowing growth amplified it, but actually economic data over the last month has been positive ... and yesterday we saw the sell off was overdone,' Kervinio said.
He noted that not only oil, but gold and base metals were also rebounding today as the commodity markets become more and more adept at recovering from bouts of profit taking.
Oil specifically, remains supported by worries over the security of supplies from Iran, currently embroiled in a dispute with the Western nations who fears its nuclear energy programme is a front for a weapons drive.
The dispute is currently being reviewed by the UN Security Council and markets fear Iran could withhold crude exports if the UN imposes sanctions against it.
Further, concerns US gasoline stocks may run low in the peak demand summer driving season have also supported oil recently, as have fears over the upcoming US hurricane season.
Analysts said the market will be keeping a close eye on today's US inventory data, expected to show gasoline stocks rose by another 1.8 mln barrels last week while demand for the fuel declined again.
At 11.39 am, July-dated Brent contracts were up 19 cents at 70.27 usd, having gained 63 cents to close at 70.08 usd yesterday. Meanwhile, June-dated US light crude futures were up 22 cents at 69.80 usd.
Prices rose yesterday after US data showed producer prices, excluding food and energy, rose less than expected last month, easing inflation worries and fuelling speculation the Fed might end its campaign of interest rate hikes.
Alexander Kervinio, analyst at SG CIB Commodities, said the market will be keeping a close eye on today's US consumer price data for further evidence the recent commodity rally has not fuelled inflation.
Fears rising inflation would spark a general economic slowdown lead to a massive selling spree across the commodities complex on Monday. The fears were exacerbated by concern high oil prices have dented demand.
The was underlined Friday by the International Energy Agency, which revised down its oil demand growth figures for 2006 by 220,000 bpd to 1.25 mln bpd, citing mild first quarter temperatures and the impact of high prices on demand.
'The IEA report triggered the sell off and fears over inflation and slowing growth amplified it, but actually economic data over the last month has been positive ... and yesterday we saw the sell off was overdone,' Kervinio said.
He noted that not only oil, but gold and base metals were also rebounding today as the commodity markets become more and more adept at recovering from bouts of profit taking.
Oil specifically, remains supported by worries over the security of supplies from Iran, currently embroiled in a dispute with the Western nations who fears its nuclear energy programme is a front for a weapons drive.
The dispute is currently being reviewed by the UN Security Council and markets fear Iran could withhold crude exports if the UN imposes sanctions against it.
Further, concerns US gasoline stocks may run low in the peak demand summer driving season have also supported oil recently, as have fears over the upcoming US hurricane season.
Analysts said the market will be keeping a close eye on today's US inventory data, expected to show gasoline stocks rose by another 1.8 mln barrels last week while demand for the fuel declined again.
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