Oil tops $91, rebounds from 18-month low

MARKETS-OIL:Oil tops $91, rebounds from 18-month low

new York  June 22, 2012, 20:58 IST

new York  06 22, 2012, 21:00 IST

 

Brent oil futures rose above $91 a barrel on Friday, rebounding from an 18-month low, but remained on course for a weekly decline of about 7 percent as investors worried about signs of slowing global economic growth.

The European Central Bank eased collateral requirements -- a move designed with Spain's woes in mind. The euro rallied on the news and European stocks trimmed losses, providing provided support for oil, traders said.

"The ECB's action will add liquidity to the system, and that is helping push up Brent futures. The oil markets are rebounding from oversold conditions, though investors are cautious because the market is well supplied," said Phil Flynn, an analyst at Price Futures Group, Chicago.

In London, August Brent crude was up $1.37 at $90.60 a barrel by 11:05 a.m. EDT (1505 GMT), bouncing up from a session low of $88.49, the lowest since December 2010.

U.S. August crude gained $1.05 to $79.25. It slid as low as $77.56, the lowest since October 5, 2011, after dropping 4 percent on Thursday.

"In the U.S. investors are watching a potential depression in the Gulf of Mexico that could develop into a storm, and so there's some short-covering going on," Flynn said.

A closely watched technical signal, the relative strength index, for Brent has dropped to 18, suggesting prices are oversold and a rebound likely. Brent crossed the 30 level that signals an oversold condition on May 30.

On Thursday, oil futures tumbled as data showed U.S. factory output grew at its slowest pace in 11 months in June, business activity across the euro zone shrank for a fifth straight month and Chinese manufacturing contracted for an eighth month.

While oil demand prospects are dimming, supply of oil remains ample. The Organization of the Petroleum Exporting Countries is pumping about 1.6 million barrels per day (bpd) more than the demand for its oil and its own supply target, OPEC figures show.