Oil hovers near $74 amid growth uncertainty
Oil prices hovered near $74 a barrel Monday as possible production disruptions in the Gulf of Mexico due to the hurricane season overcame uncertainty about the prospects of the global economy and a stronger dollar.
By early afternoon in Europe, benchmark crude for October delivery was up 26 cents to $74.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 97 cents to settle at $73.82 on Friday.
Oil fell to its lowest price since early July during Friday's trading session, reacting to disappointing economic news in the United States and slumping global stock markets.
Crude prices rose Monday amid concerns that Tropical Storm Danielle is strengthening in the Atlantic and could become a hurricane by late Tuesday, but forecasters said it appears to be heading toward Bermuda and will not threaten any major land area.
"The Tropical Storm Danielle should pose no threat to production facilities in the Gulf of Mexico but it is providing enough support for oil to allow prices to hold on to $74 a barrel," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.
Shum said market sentiment remained pessimistic amid uncertainties over the global economic recovery.
He pegged crude prices at around $75 a barrel in the near term, with a floor provided by production concerns amid the hurricane season.
Although there were predictions of relatively strong hurricanes this year, the forecasts have yet to be fully realized.
"Despite this sluggish start, we suspect weather should lend an element of support to prices at least through September, but the market is in danger of breaking down if the hurricane tally remains minimal by September's end," said a report from MF Global in New York.
Government measures to cool the Chinese economy -- usually predicted as the main source of increased energy use -- were also seen limiting oil prices.
"The rise in demand in China will remain disappointing in the months ahead," said analysts at Commerzbank in Frankfurt. "This supports our skeptical view on oil prices and we still anticipate a fall in prices to around $70 a barrel by the end of the year. In the short term, though, a technical reaction to the upside cannot be ruled out."
In other Nymex trading in September contracts, natural gas for September delivery fell 5 cents to $4.067 per 1,000 cubic feet. Heating oil gained 0.82 cent to $1.9792 a gallon and gasoline rose 0.33 cent to $1.9284 a gallon.
In London, Brent crude was up 39 cents at $74.65 a barrel on the ICE Futures exchange.