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Oil prices inched higher on Thursday as disruptions in Nigeria raised supply concerns.

Positive data also helped on expectations of a turnaround in the economy, which will increase demand for oil.

Crude for July delivery rose 42 cents to $71.45 a barrel Thursday.

Royal Dutch Shell said that some oil production had been stopped after an attack on one of its pipelines on Wednesday in Nigeria. Analysts believe such attacks could increase in the coming weeks.

On the economic data front, there an improvement in the Philadelphia Fed index on regional manufacturing, up to -2.2 in June from -22.6 last month. Experts predicted a read of -17.

Great now analysts are orchestrating acts of terrorism, always thought they were financial terrorists.

Crude oil finished the week lower as traders weighed up data showing surplus fuel supplies against reports of more attacks on oil pipelines in Nigeria, the worlds seventh biggest oil exporter.

Oil for July delivery fell $1.82 to $69.55 a barrel on New York Mercantile Exchange after a choppy session with the contract rising to a high of $72.30 earlier in the day.

The contract, which is due to expire on Monday, was down 3.3% over the week. The spike in oil prices was prompted by news of an attack by Nigeria's main militant group MEND.

But it was concern about ample supplies and weak demand that later chipped away at demand for the black stuff.

On Wednesday the weekly EIA government report showed US gasoline supplies rose unexpectedly as refiners increased output to meet demand for the summer driving season. At the same time traders are worried that rising oil prices may put off many drivers this summer as the economic downturn continues. The EIA said demand for petroleum products over the last four weeks was down by 6% from the same time last year.

Commodities: Crude slips below $67

Crude oil fell below $67 a barrel as focus turned to the weak outlook for the global economy.

Recent data has signalled that the global economy is poised for a recovery and has helped take oil prices around double the level seen at the start of the year.

However as traders weighed up data showing surplus fuel supplies and winced at global forecasts at the World Bank, sentiment turned lower and worries about demand for the black stuff resumed.

US light crude oil for July delivery fell $2.62 to settle at $66.93 a barrel on the New York Mercantile Exchange. The July contract expired Monday and the August contract becomes active on Tuesday.

The World Bank said the global economy is expected to shrink 2.9% this year, more than the 1.7% contraction forecast back in March. It also said global trade will drop by almost 10% this year while output is predicted to fall by 2.9%.

Commodities: Crude inches back towards $70

The weaker dollar, nerves ahead of weekly US energy supply data and disruptions from oil rich Nigeria stoked oil demand on Tuesday.

US light crude oil for August delivery rose $1.74 to settle at $69.24 a barrel on the New York Mercantile Exchange. But oil traders endured a choppy session with the contract falling a session low of $66.37 after disappointing US housing data.

Existing home sales rose 2.4% in May to a seasonally adjusted annual rate of 4.77m, from a downwardly revised 4.66m in April, but it was still lower than expectations. Economists had predicted an increase to about 4.82m.

There were also jitters ahead of the latest statement from the Federal Reserve.

Oil prices have jumped from below $40 a barrel at the start of this year to around $70 on the back of optimism that an economic recovery is in place.

Commodities: Gold moves ahead

Gold moved higher though gains were tempered late on after the dollar rallied on the back of comments from the Fed.

Before the Fed's comment, worries about higher inflation made gold, seen as a hedge to rising prices, more attractive to investors. But gold slipped back slightly after the Fed said inflation will remain subdued for sometime.

Gold price for August delivery rose $10.10 to finish at $934.40 an ounce.

Oil prices fell below $69 after the Fed kept interest rates near zero.

Crude had received support earlier after a report showed US gasoline stocks rose by 3.9m barrels in the week to June 19, which was above forecasts. Distillates stocks hit ten-year highs, while crude stocks fell.

Commodities: Nigerian attack boosts oil price

The price of crude was back above $70 a barrel for the first time in a week after a Royal Dutch Shell pipeline in Nigeria was attacked by militants. The Movement for the Emancipation of the Niger Delta (MEND) claimed responsibility for the attack on the pipeline which supplies Shell's Bonny terminal. A spokesman for Shell was unable to confirm whether the attack had caused an interruption to production.

Demand for oil has also been boosted this week by news of refinery problems in Texas, USA. Exxon Mobil has shut a fluid catalytic cracker at its Baytown, Texas, refinery while earlier this week Valero Energy and Marathon Oil suffered power interruptions at their Texas refineries. The Baytown refinery is the largest in the USA and can process more than half a million barrels of oil a day.

Crude oil for August delivery rose $1.56 to $70.23 on the New York Mercantile Exchange, its highest level since 18 June, with the decline in the value of the dollar also contributing to the rise in the price of the black stuff.

The slide in the value of the dollar also made gold a more attractive investment. The August futures contract for gold rose $5.10 to $939.50 an ounce in New York while the spot price rose $6.91 to $938.50 an ounce in London. Dealers said indications that the Federal Reserve intends to keep its key lending rate at its historically low level for an extended period added to the appeal of gold, with some suggesting that China would switch to buying gold bullion in preference to US government debt.

Silver was also in demand, rising more than 13 cents in London trading to just over $14 an ounce, while copper reached its highest level in a week, with the September contract rising 3.5 cents to $2.316 a pound.

as i posted on FTSE thread ......

OIL and connected issues
it is plain for all to see that crude is now heading back to levels where most regions will deem it worthwhile to re-commence development and similar work ..... and you can count Saudi into that equation too, for Aramco, who control these things in The Kingdom, shut up shop 4/6 months ago.

our business has a peripheral though relevant interest in these aspects, and market intelligence is that, though recovery is still pretty fragile, it is assuredly happening across quite a broad spectrum.

to my mind, that makes the likes of Lamprell an even more likely t/o target, and i dare say Kentz and others fall into a similar category.

Petrofac will be an undoubted beneficiary, as well as a probable predator.

SINGAPORE (Reuters) - Oil fell toward $62 on Wednesday, on course for its sixth consecutive fall and longest losing streak since mid-December, after data showed larger-than-expected builds in U.S. products stocks, reflecting little sign of a recovery in oil demand.

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Figures from the American Petroleum Institute (API) showed distillate stocks jumping by a much higher-than-expected 3.4 million barrels, while gasoline inventories rose 767,000 barrels against a forecast 600,000-barrel build.

Combined with a 1.4 million barrels fall in crude stocks -- less than the expected 2.4 million barrels decrease -- the oil data shows little recovery in demand from the world's largest oil consumer at a time when talk of "green shoots" has come under renewed scrutiny.

U.S. light crude for August delivery fell 93 cents to $62.00 a barrel by 0621 GMT (2:21 a.m. EDT), having settled $1.12 lower at 62.93 a barrel on Tuesday, its fifth straight day of losses.

London Brent crude fell 80 cents to $62.43 a barrel.

"The middle distillates numbers are terrible. It is normal that stocks are going up at this time of the year but we are already at record levels," said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.

"It looks like gasoline demand had started to get better and now suddenly looks bad. It could be for a couple of reasons: it could be a price response or it could just be that the economy is just not out of the woods yet," he added.

Prices could fall further if the Energy Information Administration , which will release its weekly inventory data at 1420 GMT (10:30 a.m. EDT), shows similarly bleak data.

Oil prices have fallen almost 15 percent from their brief surge above $73 a barrel in late June on worries a rebound in global fuel demand may be far off, after economic optimism helped lift prices from lows under $33 struck in December.

But questions over the pace of economic recovery continue to be raised, with the second-quarter's rally in energy and equity markets now petering out.

U.S. stocks fell to a 10-week low on Tuesday after a member of the Obama administration's economic advisory panel said the United States should plan to possibly provide a second round of stimulus funds to prop up the economy.

More bearish data came from Japan, where the value of the country's core private-sector machinery orders, a leading indicator of capital spending, hitting a record low in May, sending the Nikkei average < .N225> closing down 2.4 percent to a six-week low.

MSCI's index of Asia-Pacific shares outside Japan < .MIAPJ0000PUS> dropped 1.6 percent.

Potentially curtailing trading, Commodity Futures Trading Commission Chairman Gary Gensler said on Tuesday that the agency will hold hearings in the next few weeks to seek comments from consumers and market players on whether to set position limits on all commodity futures contracts.

The top regulator of U.S. futures markets is considering a clampdown on excessive speculation in energy and commodity trading by restricting holdings of big players, part of a broader move by the Obama administration to stabilize financial markets.

Oil Set for Biggest Weekly Drop Since January on Demand Concern
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By Yee Kai Pin and Ben Sharples

July 10 (Bloomberg) -- Crude oil fell, headed for its biggest weekly decline since January on concern a prolonged global recession will sap demand for energy.

Oil has dropped 10 percent this week on speculation fuel consumption in the U.S., the biggest energy-using nation, will remain subdued. Gasoline stockpiles increased over the Independence Day weekend, the peak of the summer driving season, a July 8 report showed. Yesterday, futures touched $59.25 a barrel, the lowest intraday price since the start of the year.

The No. 1 factor is still demand -- it all goes back to the economy, said Ken Hasegawa, a commodity derivatives sales manager at brokers Newedge in Tokyo. Its possible well test yesterdays low. If the market goes down further from here, we could see more selling orders.

Crude oil for August delivery fell as much as 44 cents, or 0.7 percent, to $59.97 a barrel on the New York Mercantile Exchange, and was at $60.04 at 2:41 p.m. in Singapore, poised for a fourth week of decline. Futures rose 0.5 percent to $60.41 yesterday, snapping six days of losses, the longest losing streak this year.

Crude oil bulls are hanging in there, albeit by the thinnest of margins, said Stephen Schork, president of Villanova, Pennsylvania-based consultant Schork Group Inc. If the bulls are going to put up a defense, this is where it will occur. If they fail, the path toward a $40-handle will be wide open.

Reduced Appeal

The dollar rose against the euro, reducing the appeal of commodities as a hedge against inflation. Gold slid July 8 to a two-month low of $905.10 an ounce and is headed for a second weekly decline.

The dollar traded at $1.3965 per euro at 2:43 p.m. in Singapore, up from $1.4020 in New York yesterday.

Oil may fall next week on speculation the global recession and payroll cuts will constrain demand and keep U.S. supplies ample, a Bloomberg News survey of analysts showed.

Nineteen of 41 analysts surveyed, or 46 percent, said futures will decline. Nine expect the market will be little changed and 13 forecast that oil prices will rise.

With a poor economic outlook for the future, oil is going to be pressured to come down in price, said Mike Sander, an investment adviser with Sander Capital in Seattle. Just as exuberance pushed oil higher in the second quarter, pessimism could easily push oil lower in the third quarter.

U.S. gasoline inventories climbed 1.9 million barrels to 213.1 million last week, an Energy Department report on July 8 showed. Stocks of distillate fuel, a category that includes diesel and heating oil, climbed 3.74 million barrels to 158.7 million, the biggest increase since January. The gain left distillate stockpiles 30 percent higher than the five-year average.

IEA Report

The International Energy Agency will release its monthly Oil Market Report today. The Paris-based agency June 11 raised its global oil demand forecast for the first time in 10 months, citing signs the economic slowdown is abating.

Gasoline for August delivery in New York dropped 0.8 percent to $165.08 a gallon at 2:30 p.m. Singapore time.

Brent crude for August settlement on Londons ICE Futures Europe exchange fell as much as 53 cents, or 0.9 percent, to $60.57 a barrel. Prices are down 7.7 percent this week.

To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net.

Last Updated: July 10, 2009 02:49 EDT

Crude Oil Falls a Second Day as Equities Drop, Stockpiles Gain
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By Christian Schmollinger

July 13 (Bloomberg) -- Crude oil fell for a second day as Asian stocks declined, raising speculation that the global recession will sap demand for fuel and increase stockpiles.

Oil and fuel inventories in the members of Organization for Economic Cooperation and Development rose in May to about 7 percent more than last year, the International Energy Agency said July 10. The MSCI Asia Pacific Index dropped to an eight- week low today on concern the U.S. economic recovery will be delayed. Taiwans exchange had its biggest drop in a month.

There is still a weak demand outlook and a bearish sentiment to the market, said Victor Shum, a senior principal at Purvin & Gertz Inc. in Singapore. There is more of a focus on fundamentals but the price direction is closely correlated to movements in the stock market and the dollar.

Oil for August delivery dropped as much as 97 cents, or 1.6 percent, to $58.92 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $59 a barrel at 2:20 p.m. in Singapore.

Oil on July 10 capped its biggest weekly decline since January as U.S. consumer confidence fell and fuel stockpiles in the largest oil consumer rose for a fourth week.

New York oil reached an eight-month high of $73.38 a barrel on June 30. Prices gained 37 percent the preceding two months as rising equity markets emboldened investors and the falling U.S. dollar steered funds into commodities.

Gasoline Demand

Its been a dose of reality, said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. Theres been a lot of concern stemming from the rising gasoline stockpiles over there in the States, which doesnt bode well for the demand side of things.

The dollar rose to $1.3916 against the euro from $1.3936 on July 10, limiting the appeal of commodities as an inflation hedge. The MSCI Asia Pacific Index dropped 2.1 percent to 98.94 as of 12:39 p.m. Tokyo time, with three equities declining for every two that advanced.

U.S. gasoline demand usually peaks in June through August as motorists take to the roads for the summer holidays. Motor fuel consumption over the past four weeks was down 1.4 percent from the same period last year, the Energy Department said on July 8.

Gasoline for August delivery was at $1.6404 a gallon, down 1.01 cents, on the Nymex at 2:23 p.m. Singapore time. It fell 0.8 percent to $1.6505 a gallon on July 10.

The U.S. summer driving season has been a non-event for two years in a row now, Purvin & Gertzs Shum said. The path of least resistance is still down for oil prices.

Brent crude for August settlement fell as much as 82 cents, or 1.4 percent, to $59.70 a barrel on Londons ICE Futures Europe exchange and was at $59.76 at 2:31 p.m. Singapore time.

Nigeria Attack

The Atlas Cove oil jetty and depot in Nigerias Lagos state was on fire after an attack late yesterday, the Movement for the Emancipation of the Niger Delta said in an e-mailed statement. Rebels claimed to have blown up a pipeline to Chevron Corp.s export terminal in Nigerias Delta state on July 10.

Attacks on the countrys pipelines and export terminals have cut output by 1.4 million barrels a day, the IEA said on July 10.

Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended July 7, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 15,357 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 25,420 contracts, or 62 percent, from a week earlier.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net

Last Updated: July 13, 2009 02:42 EDT

Oil Rises From Eight-Week Low on Economic Recovery Optimism
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By Mark Shenk

July 14 (Bloomberg) -- Crude oil rose from an eight-week low on optimism that the economy and fuel demand will rebound after earnings from Goldman Sachs Group Inc. topped analysts estimates and retail sales increased.

Oil climbed as much as 2.8 percent as Goldman Sachs posted record earnings and sales at U.S. retailers climbed 0.6 percent. Chinas economy may have expanded 7.8 percent in the second quarter, according to a Bloomberg News survey. The U.S. and China are the worlds two biggest oil consumers, responsible for more than 30 percent of global demand.

Oil is being helped by renewed confidence in the financial markets, said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. China probably grew by 7.8 percent in the last quarter, Goldman did better than expected and retail sales were up 0.6 percent. These all are positive signals for the economy and oil demand.

Crude oil for August delivery rose $1.35, or 2.3 percent, to $61.04 a barrel at 9:15 a.m. on the New York Mercantile Exchange. Futures climbed as much as $1.67 to $61.36 today. Yesterday, prices fell 20 cents to $59.69 a barrel, the lowest settlement since May 19.

Brent crude oil for August settlement rose 62 cents, or 1 percent, to $61.31 on Londons ICE Futures Europe Exchange.

Daily crude-oil consumption worldwide will increase by 500,000 barrels, or 0.6 percent, to 84.3 million in 2010 as industrial production gradually picks up after this years recession, The Organization of Petroleum Exporting Countries said today in a report. That compares with an increase of 1.4 million barrels a day, or 1.7 percent, to 85.2 million, forecast by the International Energy Agency on July 10.

Crude-oil supplies in the U.S. probably fell 2 million barrels in the week ended July 10 from 347.3 million the previous week, according to the median of 13 analyst responses in a Bloomberg News survey. The Energy Department is scheduled to release its weekly petroleum supply report tomorrow at 10:30 a.m. in Washington.

To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net

Last Updated: July 14, 2009 09:17 EDT

VIENNA Oil prices slipped below $62 a barrel Friday, as investors weighed mostly positive second quarter corporate results against signs of sluggish crude demand.

Benchmark crude for August delivery was down 52 cents to $61.50 a barrel by afternoon European electronic trading on the New York Mercantile Exchange. On Thursday, the contract added 48 cents to settle at $62.02.

Oil has rallied from $58.78 a barrel last week as companies such as Goldman Sachs Group Inc., Intel Corp. and JPMorgan Chase & Co. beat analyst expectations for second quarter earnings.

In other Nymex trading, gasoline for August delivery was down by more than a penny at $1.70 a gallon and heating oil dipped by nearly 2 cents to fetch $1.58. Natural gas for August delivery slid by close to 7 cents to $3.60 per 1,000 cubic feet. In London, Brent prices slipped 51 cents to $63.24 a barrel on the ICE Futures exchange.

NEW YORK Oil prices are extending their rally into a third straight day, rising above $63 a barrel Friday for the first time in 10 days.

Benchmark crude for August delivery jumped $1.17 to $63.19 a barrel on the New York Mercantile Exchange. In London, Brent prices climbed $1.95 to $64.70 a barrel on the ICE Futures exchange.

Meanwhile, retail gas prices continued to fall for the 26th straight day. Pump prices dropped overnight to a new national average of $2.481 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of gas is 19.8 cents cheaper than last month and $1.633 cheaper than a year ago.

In other Nymex trading, gasoline for August delivery added 3.65 cents to $1.75 a gallon and heating oil climbed 3.29 cents to fetch $1.6323 a gallon. Natural gas for August delivery added less than a penny to $3.674 per 1,000 cubic feet.

By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer 1 hr 30 mins ago
SINGAPORE Oil prices rose above $68 a barrel Monday in Asia as a rally fueled by an improving economic and corporate outlook extended into a third week.

Benchmark crude for September delivery was up 52 cents to $68.57 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose 89 cents to settle at $68.05.

Oil has rebounded from $58.78 a barrel earlier this month as stronger economic results from the U.S. and China boosted investor optimism.

The Dow Jones industrial average has risen about 11 percent during the last 10 days.

"Oil is completely mirroring equity markets," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "There's less risk aversion so more investment in commodities."

Many companies have reported better than expected second quarter company results, bolstering investor sentiment that the worst of a severe global recession is over.

But U.S. gasoline demand so far this summer has remained weak, raising doubts about whether the economy can emerge this year with a strong recovery.

"I think a lot of the green shoots we've seen over the last few month have a lot to do with the government stimulus which are eventually going to run out," Kornafel said. "The fundamentals should definitely have us lower."

In other Nymex trading, gasoline for August delivery rose 2.01 cents to $1.94 a gallon and heating oil gained 1.86 cents to $1.80. Natural gas for August delivery fell 6.8 cents to $3.63 per 1,000 cubic feet.

In London, Brent prices rose 52 cents to $70.84 a barrel on the ICE Futures exchange

From Bloomberg:
Crudes gains may be limited as inventories of gasoline and diesel fuel in the U.S., the worlds biggest oil user, have climbed, said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne.

Gasoline inventories climbed 813,000 barrels to 215.4 million in the week to July 17, the sixth straight gain, according to an Energy Department report on July 22. Stockpiles of distillate fuel rose 1.22 million barrels to 160.5 million, the highest since January 1985.

Although crude inventories are falling, its just going into gasoline supplies, and we havent seen much evidence of the summer driving season, said Westmore. Eventually these fundamentals will correct and you see that in these gasoline and distillate inventories getting drawn down.

Brent crude oil for September settlement rose as much as 96 cents, or 1.4 percent, to $71.28 a barrel, and traded at $70.98 on Londons ICE Futures Europe exchange at 9:50 a.m. London time. The contract rose 1.6 percent to $70.32 on July 24, the highest settlement since June 29.

Speculators net-long positions in New York oil, the difference between contracts to buy and sell the commodity, plunged 86 percent in the week ended July 21, the U.S. Commodity Futures Trading Commission reported.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net; Christian Schmollinger in Singapore at Christian.s@bloomberg.net.

ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer Fri Jul 31, 1:07 am ET
SINGAPORE Oil prices jumped above $67 a barrel Friday in Asia, extending a big rally from the previous day as surging stock markets fueled investor optimism.

Benchmark crude for September delivery was up 62 cents to $67.56 a barrel by midday Singapore time in electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose $3.59, or 5.6 percent, to settle at $66.94.

Traders have gotten whiplash this week as prices jerked up and down on investor uncertainty about the strength of the global economic recovery.

"Sentiment is very fragile," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. "Going forward, we're going to be looking at a seesawing market."

Crude investors were cheered by a jump in U.S. stocks on Wednesday. The Dow Jones industrial average rose 0.9 percent.

While the worst of a severe recession may be over, investors are cautious about a rebound this year. Signs of weak gasoline consumption and high crude inventories have dampened enthusiasm.

"When there's an indicator from the U.S. that suggests the recovery will be slow to emerge, prices get knocked back a bit," Moore said. "I think oil over the next few months will probably have a downward basis."

In other Nymex trading, gasoline for August delivery rose 0.89 cent to $2.00 a gallon and heating oil gained 0.79 cent to $1.78. Natural gas for August delivery held at $3.74 per 1,000 cubic feet.

In London, Brent prices rose 57 cents to $70.68 a barrel on the ICE Futures exchange.

By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer 6 mins ago
SINGAPORE Oil prices leapt above $70 a barrel Monday in Asia on investor expectations a recovering global economy will boost crude demand.

Benchmark crude for September delivery was up $1.12 to $70.57 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose $2.51 to settle at $69.45.

Oil prices seesawed last week before surging Thursday and Friday as investors bet that crude demand, which has been tepid this summer, will eventually pick up as the economy improves.

"Optimism for economic recovery is fighting the weak fundamentals, and right now the optimism is holding the upper hand," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Crude also has followed gains in global stocks. Most Asian indexes rose Monday.

Prices may test an eight-month high of $73.23 a barrel in the coming days, but dismal consumer sentiment in the U.S. will likely weigh on demand and send prices back into the $60s, Shum said.

"It will be difficult for oil prices to sustain in the $70s given the weak fundamentals," he said.

Mohammad Ali Khatibi, Iran's governor to the Organization of Petroleum Exporting Countries, said Sunday he expects crude prices to reach $80 a barrel by January, the oil ministry said.

In other Nymex trading, gasoline for August delivery rose 1.84 cents to $2.03 a gallon and heating oil gained 2.72 cents to $1.86. Natural gas for August delivery fell 1.7 cents to $3.64 per 1,000 cubic feet.

In London, Brent prices rose 93 cents to $72.64 a barrel on the ICE Futures exchange

By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer 27 mins ago
SINGAPORE Oil prices fell below $71 a barrel Tuesday in Asia after a big rally fueled by signs of economic recovery in the U.S.

Benchmark crude for September delivery was down $1.11 to $70.47 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Monday, the contract rose $2.13 to settle at $71.58.

Traders have brushed off evidence of weak crude demand and rising inventory levels, instead focusing on improving macroeconomic indicators.

A report Monday from the Institute for Supply Management, a trade group of purchasing executives, said U.S. manufacturing activity should increase next month for the first time since January 2008. Also, the Commerce Department said construction spending rose in June.

The positive economic news has emboldened investors to bid up stocks and oil. The Dow Jones industrial average rose 1.3 percent Monday and most Asian indexes gained Tuesday.

"With the economy seemingly improving each week, oil has felt pressure to go higher," said Michael Sander, an adviser at Sander Capital in Seattle. "As far as fundamentals go, oil still has very high inventory levels and weak consumer demand, but those just don't seem to matter."

A report last week showing U.S. crude inventories jumped the previous week suggested demand remains sluggish, and sent prices below $63 a barrel. Since then, oil has been on a tear as investors anticipate an improving economy will boost demand and whittle away supplies.

"Improving demand amid continued supply tightness should accelerate the pace of erosion of the inventory overhang, lending support to prices," Barclays Capital said in a report.

In other Nymex trading, gasoline for August delivery was steady at $2.07 a gallon and heating oil held at $1.87. Natural gas for August delivery fell 2.7 cents to $4.00 per 1,000 cubic feet.

In London, Brent prices fell 77 cents to $72.77 a barrel on the ICE Futures exchange.

Kuwait: Current oil price fine for now
Kuwait's oil minister says prices up to $80 good till end of year, but over $100 harmfuls
On Tuesday August 4, 2009, 4:08 am EDT
KUWAIT CITY (AP) -- Kuwait's energy minister says he hopes oil prices will stay between $70 and $80 a barrel till the end of the year.

Sheik Ahmed Al Abdullah Al Sabah however says prices should not rise above $100 because this could backfire on producers by lowering demand.

He spoke in Rome on Tuesday to the state-owned Kuwait News Agency.

Sheik Ahmed said the latest rise in oil prices to just over $70 reflects optimism that the world economy appears to be rebounding from recession.

Prices have modestly improved following OPEC's decision to cut production by 4.2 million barrels from September levels. The cartel, of which Kuwait is a key member, will meet in September to review production policy.