Oil edges up amid caution on economy, demand

By Robert Gibbons

NEW YORK (BestGrowthStock) – U.S. crude rose on Monday, struggling in choppy trading to stay above $70 a barrel despite high oil inventories and continued worries that Europe’s debt problems may keep demand growth curbed.

U.S. crude rose 40 cents to $70.44 a barrel at 12:48 p.m. EDT, having traded in a range from $69.57 to $70.96. Brent crude was down 11 cents at $71.57.

“Oil futures are up but the market still has fears. Earlier, it was the news from Spain on the takeover of a small bank and now it’s back to China as investors wonder if it will take steps that would pull down its economy,” said Phil Flynn, analyst at PFGBest Research in Chicago.

Flynn also cited tensions between South Korea and North Korea over the sinking of a navy ship as a supportive factor.

The euro fell (Read more about the trembling euro. ) broadly, pulling back from gains last week, after the Spanish central bank’s takeover of a savings bank added to jitters about debt problems in some of the weak euro zone countries.

The Nasdaq gained after positive broker comments lifted technology shares, but concerns about Europe’s banking system restrained the Dow and the S&P 500 indexes. (.N: )

Oil markets remain well supplied with the Organization of the Petroleum Exporting Countries pumping about 2 million barrels per day above output targets.

“The fundamentals of oil haven’t suddenly changed. There’s still plenty of oil about,” said Rob Montefusco, a commodity broker at Sucden Financial.

While oil hovers near the low end of the $70-$80 range many in OPEC have said they prefer, OPEC officials have not yet called for any steps to prop up prices. The group is not scheduled to meet until October.

Shokri Ghanem, the chairman of Libya’s National Oil Corporation, said that OPEC was very worried about and eyeing closely falling oil prices.

Ghanem echoed other OPEC officials that have said it was too early to tell if the price slide would require action.

Total U.S. crude inventories have been rising and stocks at the delivery hub for U.S. futures contracts in Cushing, Oklahoma, are at a record high.

The Cushing stocks have helped keep front-month U.S. crude futures priced at a discount to the next nearby contract.

Last Thursday’s $64.24 intraday low front-month crude price was the weakest front-month price since $62.76 was struck on July 30, 2009. Prices have plunged since a 2010 peak of $87.13 was hit May 3.

Last week, money managers sharply cut net crude oil long positions on the New York Mercantile Exchange in the week to May 18, Commodity Futures Trading Commission data showed on Friday.

U.N. Secretary-General Ban Ki-moon said he was confident the Security Council would take “appropriate” measures regarding the alleged sinking of a South Korean naval ship by North Korea.

Another global dispute helping to support oil is Iran’s dispute over its nuclear program. Iran outlined to the U.N. nuclear watchdog a deal to give up some of its enriched uranium but diplomats said the gesture would have no effect on a push to widen sanctions against Iran.

Some analysts and brokers in the oil market expect prices to recover given the demand coming from emerging economies.

World oil demand is expected to rise by 1.62 million barrels per day in 2010, led by emerging economies like China, according to the International Energy Agency. Global consumption declined in 2009.

“I think the weakness last week was a bit overdone when you look at the incredibly strong demand data from China,” said Christopher Bellew, a broker at Bache Commodities. “It probably won’t stay down here too long.”

Stock Market News

(Additional reporting by Gene Ramos in New York, Alex Lawler in London and Fayen Wong in Perth; Editing by Marguerita Choy)

Oil edges up amid caution on economy, demand