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Oil prices rebound on demand forecasts, supply concerns and tensions in Nigeria

Oil prices rebound on demand forecasts, supply concerns and tensions in Nigeria

Oil prices resumed their upward trek Tuesday, rising sharply as investors focused once again on growing global demand for crude.
The catalyst for oil's latest advance was an International Energy Agency report that said global demand will continue to rise, especially in China. Demand for fuel for reconstruction work in the aftermath of May's earthquake will boost Chinese oil demand by 5.5 percent this year, the IEA said, a slightly higher forecast than in previous reports.
"A 5.5 percent increase in one of the largest consumers of oil in the world is a lot of barrels of oil," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.
The Paris-based IEA said global demand for petroleum products such as gasoline, diesel and heating oil will grow by 0.9 percent, or 800,000 barrels a day, in 2008. That's down from the 1.2 percent, or 1 million barrels, the IEA forecast earlier this year, but investors had expected even more evidence that high prices are cutting consumption, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
"I think the market was looking for a bigger amount of demand destruction in that report," Flynn said.
The IEA, an energy adviser to Western industrialized nations, also suggested non-OPEC oil producing nations are having a tough time meeting demand.
Light, sweet crude for July delivery rose $2.26 to $136.61 a barrel on the New York Mercantile Exchange.
Also supporting prices was the second attack this week on a Nigerian oil industry security vessel. At least one person was killed. Nigeria is a major U.S. oil supplier. Militant attacks have cut into that nation's oil output.
Oil futures bucked the dollar, which rose against the euro on supportive comments by U.S. officials. Typically, a stronger dollar prompts selling by investors who had bought commodities such as oil as a hedge against inflation. Still, analysts expect that a longer-term strengthening of the dollar would lower oil prices.
The oil market reacted little to reports Tuesday that Saudi Arabia has increased oil output by 500,000 barrels a day this quarter, 200,000 barrels a day more than previously thought.
"A couple hundred thousand barrels just isn't enough," Ritterbusch said.
In other Nymex trading, July gasoline futures rose 6.06 cents to $3.4546 a gallon, and July heating oil futures rose 6.37 cents to $3.9407 a gallon. July natural gas futures rose 7.1 cents to $12.675 per 1,000 cubic feet.
In London, July Brent crude rose $2.22 to $136.13 on the ICE Futures exchange.
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Associated Press writers George Jahn, in Vienna, Austria, and Eileen Ng, in Kuala Lumpur, Malaysia, contributed to this report.


Updated : 2021-06-14 19:12 GMT+08:00