Oil scrambles over $70

Oil scrambles over $70

Oil climbed back above $70 a barrel on Friday, rising for a third day as investors grew more optimistic about U.S. economic growth and energy demand after a toned-down inflation warning from the U.S. Federal Reserve.

U.S. light sweet crude rose 68 cents to $70.18 by 0714 GMT, taking gains since Tuesday to more than 1.5 percent in a muted snap-back from a global market rout this week when risk-averse investors sold off stocks and metals on fears that rising inflation could further slow economic growth.

Brent crude was up 61 cents at $69.06 a barrel.

Oil, supported also by geopolitical concerns over Iran and the four-month loss of a quarter of Nigeria’s production, lagged the earlier losses and also trailed the recovery, which saw the U.S. Nasdaq rise nearly 3 percent and copper leap 5 percent on Thursday.

“Oil held up a bit stronger than other resources in the earlier wave of selling, but it is benefiting now from a bit of a return of the speculative element,” said Gerard Burg, minerals and energy economist and National Australia Bank.

Financial markets rallied after Federal Reserve Chairman Ben Bernanke toned down his warnings against U.S. inflation, saying expectations of price increases had “fallen back somewhat” and that the impact of high energy prices has been limited.

Investors saw the statements as less hawkish than previous messages from Bernanke and other Fed officials, who had spooked investors over the past month with repeated warnings on the risks of rising inflation amid slowing U.S. economic growth.


Oil’s rebound was also aided by mid-week data showing a fall in U.S. crude stocks as refiners ramped up operations to meet summer gasoline demand, although prices have kept within the $68-to-$73-a-barrel range since early May.

“I don’t think there’s anything right now to give the market a clear direction to break out of that band,” said Burg.

Focus was tight on Iran, the world’s fourth-largest oil exporter, which has yet to give a formal response to incentives offered by world powers to end a stand-off over its atomic program that traders fear could threaten Gulf supplies.

World powers urged Tehran on Thursday to take up the offer and the West soft-pedaled previous threats of possible sanctions, while the country’s supreme leader reiterated its resistance to demands that it halt uranium enrichment.

“The continuation of this scientific move is among (our) prominent and main objectives,” Ayatollah Ali Khamenei said.

In Shanghai on Friday, Iran’s President Mahmoud Ahmadinejad said the offer was a positive step, but gave no hint as to when he might formally respond. He also met with his counterpart in China, which opposes a push toward U.N. sanctions.

Overall, oil prices are nearly 15 percent up so far this year and stand at their highest, in real terms, since 1980. They have surged from $20 a barrel at the start of 2002.

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