Tuesday August 25, 06:14 PM
Oil price hits ten-month peak at 75 dollars
LONDON (AFP) - World oil prices briefly struck 75 dollars per barrel on Tuesday for the first time in ten months, as traders reacted to rebounding consumer confidence in key energy consumer the United States.
In late afternoon trade here, New York's main contract, light sweet crude for October delivery, spiked to 75.00 dollars exactly -- reaching a level last seen in October 2008 before the global recession.
However, the contract later pulled back to 73.45 dollars, down 80 cents from Monday's closing level.
And London Brent North Sea oil for October fell 42 cents to 73.95 dollars a barrel.
"It was very much a knee-jerk reaction," said Hanson Westhouse analyst David Hart, adding that there was a lack of buying interest to maintain prices above the key 75-dollar level.
"The logical conclusion to draw is that prices are going to go higher," Hart added.
US consumer confidence rose more than expected in August after two consecutive months of declines, buoyed by a jump in recovery hopes for the coming months, the Conference Board announced on Tuesday.
The business research firm said its consumer confidence index climbed to 54.1 in August from an upwardly revised 47.4 in July.
The rebound in confidence was stronger than the 47.9 reading that most analysts had expected. The index had hit an eight-month peak of 54.8 in May.
The August data "had a great deal of impact and was probably responsible for the whole move higher," Hart added.
"Consumer confidence is very closely tied to the US economy -- 70 percent of the economy is driven by consumer spending and if the consumer is feeling better then that bodes well for the economy, which is good for energy demand."
Crude futures had already powered to 10-month peaks on Monday amid growing hopes for global economic recovery and China's strong oil data.
Markets also found a springboard from US Federal Reserve chief Ben Bernanke's positive comments on Friday about the outlook for recovery from global recession.
Fed Chairman Ben Bernanke, who was reappointed to a second four-year term on Tuesday, had said last week that prospects for growth "appear good" despite financial market strains.
European Central Bank boss Trichet also predicted last week that the world's economic "free fall" was over.
Oil prices have slumped since striking record highs above 147 dollars in July 2008 as a vicious global recession slashed energy demand. They have since clawed back ground on recovery hopes.
The market also got a major boost on Monday from data out of China -- the world's second-biggest energy consuming nation after the United States.
"Chinese demand for oil increased for the fourth consecutive month in July," said analysts at JBC Energy in Vienna.
"Year-on-year, oil consumption -- excluding stock changes -- was up by some 3.5 percent," they noted.
Traders will switch their focus on Wednesday to the weekly oil inventories report from the US government's Department of Energy.
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