Sun, Feb 19, 2006 - Page 10 News List

Oil rebounds as investors prepare for long weekend

AFP , NEW YORK

Oil prices shot higher on global markets on Friday for the second day in a row, rebounding from losses over the past week amid positioning ahead of a long holiday weekend in the US.

Tensions in key oil producer Nigeria and fears about a possible cutback from the OPEC oil cartel also kept the market nervous.

New York's main contract, light sweet crude for delivery in March, climbed US$1.19 to US$59.65 per barrel in closing deals.

In London, the price of Brent North Sea crude for April delivery added US$1.10 to close at US$59.89 per barrel.

"It is a correction. Oil is rebounding because the market felt it was oversold," said Victor Shum, an energy analyst with Purvin and Gertz, explaining the resurgence after steep declines early is week.

Shum added that the coming long weekend in the US was also having a supportive effect as traders covered positions ahead of the extended break.

The New York market will be closed for the President's Day public holiday on Monday.

"The market seems to have found a base to spring from its grossly oversold condition," analyst Mike Fitzpatrick at Fimat USA said.

"Even though stockpiles are swelling, the market had descended too far, too fast. Our thinking is that a bottom has formed for the near term, particularly with the weather shifting to more seasonal readings for the next few days," he said.

Fitzpatrick said that Venezuela called for a March OPEC production cut this week, "which will cause shorts more than a modicum of uneasiness over a long weekend."

"Obviously, the market retains its potential for extreme volatility," he added.

Oil prices had tumbled on Wednesday after the weekly US Department of Energy inventories report showed better-than-expected US crude and heating oil supplies.

In the wake of the news, New York crude futures hit a two-month low on Wednesday, sinking to US$57.60 per barrel.

US crude stocks are now about 11 percent higher than at the same stage last year, while gasoline and distillates stockpiles are up 1.8 percent and 14 percent respectively.

Oil prices began to rebound on Thursday as tensions over Iran came back into focus.

"Geopolitical issues are still providing some support to the market," analysts at the Sucden brokerage firm said on Friday.

The unfolding crisis over Iran has led to concerns of possible disruptions to the country's oil exports of 2.6 million barrels of crude per day.

Iran insisted on Thursday that it was not seeking a nuclear weapon, rejecting accusations by France that its atomic drive was "clandestine" and "military" in nature.

In Nigeria, Africa's biggest crude exporter, supply worries persisted owing to simmering tensions there, dealers said.

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