Oil stays above $79 amid mixed economic signs
Associated Press Writer
KUALA LUMPUR, Malaysia (AP) – Oil prices hovered above $79 a barrel Thursday in Asia amid mixed signals over the strength of the global economic recovery.
Benchmark crude for December delivery was down 18 cents to $79.40 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 44 cents to settle at $79.58 on Wednesday.
Prices were underpinned by U.S. data showing lower crude inventories last week and auto club AAA reporting that more drivers are expected on America’s highways over the upcoming Thanksgiving weekend, suggesting that consumers are more confident in the economy.
Gains, however, were offset by poor economic news stemming from an unexpected drop in U.S. home construction and disappointing forecasts from technology companies.
“The resistance to oil sustaining above the $80 level is very strong. There are signs of economic recovery but so far, the signals have been mixed and the sustainability of the recovery is uncertain,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
Crude prices have zigzagged around $79 a barrel for more than a month.
The U.S. Energy Information Administration reported that the country’s stockpile of crude oil fell by 900,000 barrels last week. But the drop was hardly a sign of a recovering economy. American petroleum consumption has fallen to the lowest level since July 17, and oil companies are importing much less oil as they scale back their refining operations.
The Commerce Department separately said construction of homes and apartments fell 10.6 percent in October to an annual rate of 529,000 – well below the pace of 600,000 that economists expected.
Despite weak demand from consumers and doubts over the economic recovery, Shum said crude prices are expected to remain within the low $70 and high $80 range.
A weak dollar continued to be a boost for the crude price as investors seeking a dollar hedge and better returns will continue to buy commodities such as oil and gold, he said.
The price of crude, which is traded in the U.S. currency, tend to rise as the dollar falls and investors holding strong international currencies get more buying power.
In other Nymex trading, heating oil fell 0.10 cents to $2.048 a gallon. Gasoline for December delivery was up 0.1 cents to $2.012 a gallon. Natural gas for December delivery fell 0.9 cents to $4.245 per 1,000 cubic feet.
In London, Brent crude for January delivery dropped 6 cents to $79.41 on the ICE Futures exchange.