Oil rises above $70 as markets stabilize

September 1, 2009 7:00:47 AM PDT
Oil prices rose slightly above $70 a barrel Tuesday, recovering only some of the sharp losses suffered Monday, when investors worried about the economic outlook of China. Benchmark crude for October delivery was up 18 cents at $70.14 a barrel by late afternoon European time in electronic trading on the New York Mercantile Exchange.

The contract slumped $2.78 on Monday to settle at $69.96 after a drop in stocks heightened investor concerns that the global economic recovery may be weaker than expected. China's benchmark stock index fell 6.7 percent Monday while the Dow Jones industrial average fell 0.5 percent.

"As much as we would like to read into yesterday's 'weakness,' we will not," commented trader and analyst Stephen Schork, in his Schork Report. "As far as we are concerned, it was end-of-month volatility compounded by yet to be substantiated fears regarding China."

Most Asian stock indexes rose modestly Tuesday, including China's, although European markets were down.

"Stocks are a leading indicator of the economy, so if we have a slump in stocks, that's one fewer driver to support high oil prices," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

Oil will likely trade between $65 and $70 during the next few weeks, Shum said.

"I don't expect a big pullback because we are starting to see more signs of economic life," he said. "There's clear evidence that the global economy has reached a bottom."

In other Nymex trading, gasoline for October delivery rose 1.57 cents to $1.83 a gallon and heating oil gained 1.42 to $1.82 a gallon.

In London, Brent crude was up 22 cents at $69.87.

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Associated Press Writer George Jahn in Vienna contributed to this report.

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