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News // Markets & Stocks

Oil prices rose by more than 3% Tuesday for reaching a two-week high above $77

14 July 2010 , 08:03Reuters1816

 

Oil prices rose nearly 3 percent Tuesday to a two-week high above $77 per barrel as better-than-expected corporate earnings boosted confidence about the economy and lifted markets. The principal U.S. stock indexes rose more than 1.5 percent after strong results from aluminum maker Alcoa gave a promising start to the earnings season. "There's no doubt the stock market led the oil market higher," said Phil Flynn, senior analyst with PFGBest Research. U.S. light, sweet crude for August delivery settled up $2.20, or 2.94 percent, at $77.15 per barrel, having earlier fallen to $74.25. London Brent crude for August delivery settled up $2.28 at $76.65 a barrel. The August contract price moved briefly above September as traders bet maintenance in the North Sea would boost Brent in the short term.

 

Prices were also supported by rising European equity markets and a decline in the dollar. A weakening dollar is bullish for oil because it makes crude cheaper for buyers holding other currencies. Continued strength in U.S. corporate earnings reports would signal overall strength in the U.S. economy, which would imply greater future demand for oil. Oil markets were also watching the latest monthly report from the International Energy Agency, which revised higher its 2010 oil demand estimate by 80,000 barrels per day, but forecast slower growth in 2011. Global oil demand will grow by 1.35 million bpd next year to 87.84 million bpd, according to the report by the IEA, which advises 28 industrial countries, compared with demand growth of 1.77 million bpd expected this year. "The key element is the gradual scaling back of economic stimulus programs, which we are assuming takes place over the next 12 to 15 months," David Fyfe, head of the IEA's Oil Industry and Markets Division, told Reuters Insider TV. "That's taking a little of the post-recessionary froth out of the market."

 

Prices were also supported by signs bulging inventories in the world's largest energy consumer may have fallen last week. U.S. crude stockpiles were predicted to have dropped by 1.4 million barrels in the week to July 9, a Reuters survey showed, after tumbling 5 million barrels a week earlier because of disruptions related to Hurricane Alex. Distillate inventories probably rose by 800,000 barrels, the survey showed, while gasoline stocks were expected to have risen by about 100,000 barrels. The industry group American Petroleum Institute will release its weekly inventory report on Tuesday at 4:30 p.m. EDT, followed by government statistics from the Energy Information Administration on Wednesday at 10:30 a.m. EDT.  

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