Wednesday July 1, 04:40 PM
Oil prices trim gains on US energy report
LONDON (AFP) - Oil prices pared gains on Wednesday, after bouncing above 71 dollars in earlier trade, despite a larger-than-expected drop in crude reserves in key energy consumer the United States.
New York's main contract, light sweet crude for August delivery rose 20 cents to 70.09 dollars a barrel.
Brent North Sea crude for August delivery advanced 25 cents to 69.55 dollars.
The US government's Department of Energy (DoE) said American crude oil reserves tumbled 3.7 million barrels in the week ending June 26.
That was the fourth weekly drop in a row and contrasted with market expectations for a lighter decline of 2.1 million barrels, according to analysts polled by Dow Jones Newswires.
The DoE added that US gasoline or petrol stocks rose 2.3 million barrels, and distillates, which include diesel and heating duel, increased by 2.9 million barrels last week.
Prices had sunk Tuesday from eight-month peaks above 73 dollars after new data showed a plunge in American consumer confidence.
"Crude oil tumbled from an eight-month high as US consumer confidence declined in June, indicating lower fuel demand," said BetOnMarkets analyst David Evans.
"Oil prices are likely to continue to trade around the 70 dollar level, as traders are worried that the economy has not hit bottom," he added.
Some analysts expect that the rebound in crude prices, coming mainly on the back of investors looking for an alternative to equities, will be temporary amid fresh worries about US energy (USEG - news) demand.
Figures released on Tuesday by the Conference Board, a business research group, showed that US consumer confidence sank in June as Americans fretted about the recession and vanishing jobs.
The Conference Board's consumer confidence index retreated to 49.3 points in June from a revised 54.8 in May, an eight-month high. Most analysts expected a much stronger reading of 55.3 points.
Oil jumped dramatically -- by 40 percent, or more than 20 dollars -- in the second quarter on rising confidence that the global slump is easing.
In early trading on Tuesday, Brent oil had struck 73.50 dollars -- the highest level since last October -- as the market was propelled by tensions in key crude producer Nigeria.
Nigerian rebels on Monday announced a new raid against a Shell (LSE: RDSB.L - news) oil facility and said they had killed at least 20 soldiers in a gun battle, a claim denied by the security forces.
While a Shell spokesman confirmed the raid and said it had caused a loss of production, Nigeria's combined police and army joint task force (JTF) denied there had been any clash with the rebels.
The Niger Delta has since 2006 been rocked by violence by armed groups who say they are fighting for a greater share of the region's oil wealth for the local population.
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