Oil trades above $70 as equity market rallies

08 October 2009

Projected increase in US demand drives crude price higher

Equity market rallies and an improved forecast for US demand helped keep crude oil prices above $70 a barrel during the week ended 8 October.

The world’s biggest oil consumer’s benchmark November West Texas Intermediate (WTI) contract was trading at $70.20 a barrel on 8 October. This was unchanged from a week before but slightly up from the previous day when it traded below $70.

Europe’s November Brent contract was trading at $67.90 a barrel on 8 October, down $0.95 from a week before when it traded at $68.80.

Prices were boosted on 6 October after the US’ Energy Information Administration (EIA) raised its demand forecast for the fourth quarter of 2009 to 410,000 barrels a day (b/d) rather than the 240,000 b/d it reported previously. The agency still expects oil demand to drop 1.79 million b/d to an average 83.67 million b/d during the year.

However, the energy administration also reported that stocks of crude oil, gasoline and diesel, all increased during the week ended 2 October, signalling that demand was not increasing in line with expectations of an economic recovery.

This was tempered by stronger equity markets as a number of companies reported better than expected results for the third quarter.

“It is the usual balancing act,” says one London-based oil market analyst. “People are looking for positive signals, but there are still negative influences as well. We need stronger signals from a few good company results before we can say that the crisis is really over.”

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