Tuesday August 25, 09:26 PM
Oil price rally fizzles after hitting 75 dollars
NEW YORK (AFP) - New York oil prices briefly struck 75 dollars per barrel on Tuesday for the first time in 10 months before falling sharply ahead of new inventory data in the United States, the world's top energy user.
New York's main contract, light sweet crude for October delivery, spiked to 75.00 dollars, a level last seen in October 2008 before the global recession, as the market welcomed a report showing rising US consumer confidence.
But investors started selling when the contract did not surge past the 75-dollar mark. It settled at 72.05 dollars a barrel, down 2.32 dollars from Monday's close.
London's Brent North Sea oil for October dropped 2.44 dollars to 71.82 dollars a barrel.
"There was a lot of anticipation today that crude would break through to 75 dollars," sparking buying, said Andy Lipow, Lipow Oil Associates.
"But when that didn?t happen, we saw crude oil prices retreating quite rapidly over the lunch-time hour."
Prices shot up to 75 dollars after the Conference Board, a business research firm, announced Tuesday that 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,
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" on the oil market, Hanson Westhouse analyst David Hart said.
"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."
US demand will be tested Wednesday when the Department of Energy reveals its weekly investory data. Last week's data showed crude oil stockpiles falling by a surprising 8.4 million barrels, and some analysts expect a drop of more than one million barrels this week.
Crude futures had 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 chairman Ben Bernanke's positive comments on Friday about the outlook for recovery from global recession.
The Fed chief, who was nominated Tuesday by US President Barack Obama for a second four-year term, said last week that prospects for growth "appear good" despite financial market strains.
European Central Bank chief Jean-Claude 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.
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