Oil prices rise on demand recovery forecast
LONDON: Oil prices rose on Monday, breaching 73 dollars in New York, boosted by a forecast of higher demand amid growing hopes of economic recovery, traders said.
New York's main contract, light sweet crude for delivery in November, climbed 1.42 dollars to 73.19 dollars a barrel.
Brent North Sea crude for November delivery gained 1.27 dollars to 71.27 dollars.
"Prices are buoyed by improving demand prospects and sentiment, but for any sustained (price) move higher, we would need inventories to continue to taper off as underlying demand improve," said Barclays Capital analyst Amrita Sen.
Prices were supported by an International Energy Agency (IEA) report on Friday that forecast a rise in demand at the end of this year and into 2010 as the global economy recovers from a slump.
"The IEA sharply revised its oil demand forecast for 2010 upwards, so that has added to the buoyant mood," said Victor Shum, an analyst for energy consultancy Purvin and Gertz.
The agency revised upwards its estimate for global oil demand this year by 200,000 barrels a day and for next year by 350,000 barrels a day.
Despite its upbeat forecast on demand, the IEA report also cautioned that prices were unlikely to rise dramatically.
Demand for oil has plunged in the worst financial downturn since the Great Depression, with crude prices falling from historic highs of more than 147 dollars in July 2008 to about 32 dollars in December. They have since won back ground on economic recovery hopes.
"While price action seems settled in the 65-75 dollar range, any move above 75 dollars will be contingent on a more sustained improvement in global oil demand and its associated impact on eroding the inventory overhang," said Sen.
Oil prices also won support on Monday from rallying stock markets in Europe amid more positive earnings news from Dutch electronics giant Philips, traders said.
Last week, US aluminium giant Alcoa kicked off the third-quarter earnings season by announcing a surprise swing into profit in the three months to September 30, boosting commodity prices.
World oil prices had also rallied last week as the dollar weakened on a press report, widely denied, that Gulf states considered dropping the greenback for oil transactions.