Oil prices mixed on soft demand
Agence France-Presse
First Posted 05:12:00 01/07/2009
Filed Under: Oil & Gas - Downstream activities, Markets & Exchanges
NEW YORK — Oil prices closed mixed Tuesday as market concerns about soft demand eclipsed supply concerns amid rising geopolitical tensions in the oil-rich Middle East and a gas war between Russia and Ukraine.
New York's main contract, light sweet crude for February, fell 23 cents a barrel to close at $48.58 on the New York Mercantile Exchange.
In London, Brent North Sea crude for delivery in February rose 91 cents to settle at $50.53 on the InterContinental Exchange.
"There was probably some profit taking, bolstered by the latest economic statistics which are negative. They highlighted the weakness of demand, while recently the market has been preoccupied by supply," said Antoine Halff, an analyst at Newedge Group.
US data showed a moderating decline in the huge services sector and a continued fall in industrial orders.
Oil prices had found support above $50 a barrel during the session on supply worries due to deepening geopolitical frictions, analysts said.
The New York futures contract hit an intra-day peak of $50.47 and Brent leaped to $52.21, a level last seen on Dec. 1.
Oil prices have firmed amid the Israel-Hamas conflict in the Gaza Strip and an escalating Russia-Ukraine gas war that is curbing supplies to Europe, analysts said.
"Oil prices increased by nearly 30 percent since the end of 2008, with geopolitical tensions (Middle East and Russia), expectations of an economic recovery in 2009, hedge funds back on commodities and finally cold temperatures," said Thierry Lefrancois, economist at Natixis.
The Israeli military assault on the Gaza Strip was in its 11th day Tuesday as casualties mount and international pressure grows for a ceasefire. Israel said the offensive is aimed at halting Hamas rocket attacks.
"The conflict in Gaza is no threat to the prompt and direct supply of oil but as the humanitarian disaster continues to intensify it could turn to have an indirect impact on oil supplies," Petromatrix analyst Olivier Jakob said.
In Europe, the European Union on Tuesday slammed cuts in natural gas supplies to Europe as "completely unacceptable" as an energy price war raged between Russia and Ukraine.
"Russia continues to play hardball" on gas supplies, said Jakob.
Oil prices had already risen sharply on Monday as the Israeli-Palestinian conflict intensified and major crude producer Iran said OPEC would hold a special meeting next month.
Iran's OPEC representative Mohammad Ali Khatibi on Monday said that the oil producers' cartel would hold an extraordinary meeting in Kuwait in February.
OPEC, whose 12 members together produce about 40 percent of world oil, last month agreed to cut output by 2.2 million barrels per day in a bid to shore up crude prices.
World oil prices fell by about 54 percent in 2008 as a sharp global economic slowdown weighed on energy demand in the second half of the year.
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