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Oil prices regain lost ground

Oil prices rose on Friday to regain ground lost in a fall the previous session, as persistent supply concerns and a late rebound in United States stocks offset worries about US economic growth.

Wall Street fell on Thursday but finished well off its lows after a late rebound in financial shares lifted other stock sectors. The rebound prompted fresh buying in crude oil futures.

”The US equities market bounced a bit at the end there, and what you’re seeing now with the oil price is a correction in early trading,” said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney.

Light, sweet crude for December delivery gained $1 to $96,46 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore.

The contract fell 91 cents to settle at $95,46 a barrel on Thursday after US Federal Reserve Chairperson Ben Bernanke said the housing slump and high oil prices, among other factors, will slow economic growth in coming months, a warning that sent stocks tumbling.

”Effectively you saw a burst of precautionary profit-taking last [Thursday] night, but markets have probably rethought how tight the market is, and might be in the near term, and that’s caused an upward adjustment,” Moore said.

Energy investors worry that any slowdown in the US or global economy will crimp demand for oil and gasoline. The US is the world’s largest user of oil, accounting for about one-quarter of daily petroleum consumption.

Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

News of two shutdowns in the North Sea exacerbated the overall supply worries. ConocoPhillips and BP shut down platforms that pump 220 000 barrels of crude a day. The closures will likely last no longer than five days, but traders grow concerned any time there is a disruption in normal oil flows.

Oil prices were also supported by word of a power outage and fire on Thursday at Valero Energy’s 325 000-barrel-a-day refinery in Port Arthur, Texas. While it’s too early to tell how much production will be affected, the outage added to investor concerns.

In London, Brent crude added 65 cents to $93,44 a barrel on the ICE Futures exchange.

Estimates of where crude prices will head from here vary. Many analysts expect prices to rise to at least $100 a barrel, but a growing chorus is warning that futures are due for a sharp downturn soon.

Few analysts believe the underlying fundamentals of supply and demand support such high prices. Many blame speculative investing fuelled by the weak dollar for oil’s recent run-up. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

The dollar has been hitting multiple-decade lows against other major currencies, and slid again against the euro on Thursday. — Sapa-AP

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