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Oil prices jump on news of strong US economic growth
AFP
NEW YORK
Petroleumworld.com 07 30 07
World oil prices jumped Friday after stronger-than-expected US economic growth data renewed concerns about supply in the face of anticipated demand from the world's biggest economy.
New York's main futures contract, light sweet crude for delivery in September, soared 2.07 dollars to close at 77.02 dollars per barrel.
In London, the price of Brent North Sea crude for September delivery rose 1.08 dollars to settle at 76.26 dollars per barrel.
The US economy expanded 3.4 percent in the second quarter, the Commerce Department said Friday, slightly ahead of the average Wall Street estimate of 3.2 percent.
Growth in US gross domestic product (GDP) picked up after a lackluster 0.6 percent rate, revised downward from 0.7 percent, in the first quarter.
The news came at the end of a roller-coaster week of trading. On Thursday prices fell sharply on mounting concerns that the problems in the subprime mortgage sector, where home loans are extended to people with poor credit, were spreading to the broader economy.
The growth figures "should go a long way towards restoring confidence in the markets," said Mike Fitzpatrick, an analyst at Man Financial.
"The full affects of the subprime mortgage debacle are, as yet, unknown. Certainly it has shaken the confidence of those who appear to be having second thoughts about whether crude oil prices should be pushed toward last year's highs, especially if global demand growth over the balance of the year is now in question," he said.
In addition, major oil companies are also falling short of production targets, North Sea oil output is falling and OPEC seems to be unwilling to raise production this year.
"Crude oil was up ... bouncing back after yesterday's (Thursday's) selloff that was triggered by concerns the US subprime mortgage crisis could spread to other markets," Sucden analyst Andrey Kryuchenkov said.
"There are concerns that petroleum demand could be impacted," he added.
On Thursday, world oil prices closed down about a dollar amid renewed US economic fears and a rout across global equity markets.
Before sliding however, the New York contract struck 77.24 dollars -- a level last seen on August 9, 2006 -- as keen global demand and tight supplies fueled speculative buying.
It has been a volatile week for the oil market, with prices beginning the week lower, spiking and then falling again.
Economists are worried that a depressed US housing market could lead to a "credit crunch" and spread to the global economy, thereby crimping demand for crude.
Crude prices had kicked off the week lower after OPEC president and United Arab Emirates Energy Minister Mohammed al-Hamli expressed concern over surging prices and said the group was prepared to pump more crude oil if needed.
The Organization of the Petroleum Exporting Countries holds its next output meeting on September 11 in Vienna, where the cartel is headquartered.
"Hedge funds and investment trusts are looking at oil long-term so there will (continue to) be a steady stream of money into the market," said Bank of Ireland analyst Paul Harris.
"People are getting comfortable with the idea of oil pushing above 100 dollars in the coming years."
AFP 27 1954 GMT 07 07
Copyright© 2007 AFP. All rights reserved.
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