Oil prices rise on inventory concerns
Posted: 18 November 2009 0623 hrs

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NEW YORK: Oil prices rose for a second consecutive day Tuesday amid forecasts of depleting fuel stockpiles in the United States, the world's largest energy consumer.

New York's main contract, light sweet crude for December delivery added 24 cents to US$79.14 a barrel.

London's Brent North Sea crude for January delivery gained 21 cents to US$78.97 a barrel.

"The market is showing a surprising strength," said independent oil analyst Ellis Eckland.

Eckland and many other analysts expect a drop in storage of distillate fuel, a category that includes heating oil and diesel, when the US Energy Department releases weekly inventory levels on Wednesday.

Drops in inventory levels could also be exacerbated by Hurricane Ida, which weakened to a tropical storm earlier this month but led to closure of some petroleum installations in the Gulf of Mexico.

The strengthening dollar Tuesday failed to dampen prices.

A stronger greenback makes dollar-denominated commodities - like crude oil and gold - more expensive for buyers using other currencies. That tends to reduce demand for such raw materials.

"The oil price remains glued to movements in the dollar," said analyst David Hufton at PVM Oil Associates.

The dollar gained against the euro Tuesday as jittery investors bought the "safe-haven" greenback after fresh US industrial data raised fears over the strength of its economic recovery.

US industrial production figures for October showed a mixed picture Tuesday as manufacturing output eased after several strong months, Federal Reserve data showed Tuesday.

Crude prices had soared US$2.50 on Monday from a weak dollar and data showing that the Japanese economy expanded 1.2 per cent in the July-September period.

It was the second straight quarter of expansion in the world's second-largest economy.

Meanwhile, OPEC president Jose Maria Botelho de Vasconcelos has signalled that US$75-80 oil is an adequate level to allow for a global economic recovery.

The Organization of Petroleum Exporting Countries (OPEC) pumps about 40 per cent of the world's oil.

- AFP/yb