Oil hovers around $79 in Asian trade

Oil prices rose slightly, extending gains in Asian trade today, as investors awaited the European market's reaction to last week's bank stress test results and as a US storm threat eased, analysts said.

New York's main contract, light sweet crude for delivery in September, edged up 13 cents to $79.11 a barrel while Brent North Sea crude for September delivery gained 22 cents to $77.67.

"The oil market is likely to extend its gains, although they could be quite muted, while waiting for the European market to open. Support will come from the strong US equities markets on Friday," Serene Lim, a Singapore-based oil analyst with Australia's ANZ bank, told AFP.

The market's gains on Friday were helped by rising US equities as encouraging company earnings propelled Wall Street stocks to their best levels

in a month but were pared after the stress test results were released.

Many analysts questioned the rigour of the assessments after the results found seven banks, mainly in Spain, failed the tests out of 91 banks assessed for resistance to economic upheaval.

"Up to now the Asia markets have some scepticism that the stress tests on the European banks were not strict enough so they will be looking at the European reaction," Lim said.

Prices were also capped after the threat of Tropical Storm Bonnie eased at the weekend as fears that it could damage oil production platforms in the Gulf of Mexico faded, Lim said.