Oil hovers near $76 amid weak US crude demand

By ALEX KENNEDY

posted: 29 MINUTES AGO

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SINGAPORE -Oil prices hovered near $76 a barrel Wednesday in Asia as investors mulled whether signs of a sluggish U.S. economy and weak crude demand justified a further sell-off this week.

Benchmark crude for January delivery was up 24 cents to $76.27 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.54 to settle at $76.02 on Tuesday.

Crude has fallen about 7 percent since reaching its high this year of $82 a barrel last month amid evidence economic recovery in the U.S. will be tepid.

The Commerce Department on Tuesday revised down third quarter gross domestic product growth to 2.8 percent from 3.5 percent, a disappointing result since economies emerging from recessions often see larger expansions.

U.S. crude demand also appears to be stagnant as oil supplies keep growing.

Crude inventories jumped more than expected last week, the American Petroleum Institute said late Tuesday. Crude stocks rose 3.3 million barrels while analysts had expected a rise of 1.4 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Information Administration plans to announce its inventory report later Wednesday.

Crude is testing the bottom of a month-long trading range of between $76 a barrel and $82 and some energy analysts, such as Ritterbusch and Associates in Galena, Illinois, say prices could fall to $70 a barrel during the next month.

Other analysts, however, expect prices to rebound as investors seek an inflation hedge amid a weakening U.S. dollar. Bank of America Merrill Lynch forecast an average price of $85 a barrel next year.

"Loose monetary policy and a weaker dollar should put upward pressure on crude oil prices next year," the bank said in a report. "In addition to the monetary factors, a stronger than expected cyclical rebound in the global economy should lead to tighter physical oil supply and demand fundamentals next year."

The euro rose to $1.4989 in Asian trading from $1.4958 on Tuesday while the dollar fell to 88.25 yen from 88.53.

In other Nymex trading, heating oil was up 0.5 cents $1.955 a gallon. Gasoline for December delivery fell 0.4 cent to $1.935 a gallon.

In London, Brent crude for January delivery rose 32 cents to $76.78 on the ICE Futures exchange.

2009-11-25 01:17:18