Oil holds near $78 ahead of key U.S. data

 @ibtimes
on February 26 2010 8:24 AM

Oil held around $78 a barrel on Friday after sliding more than 2 percent the day before as traders mulled recovery prospects for the United States, the world's top energy consumer, ahead of economic data.

Data on Thursday pointed to a lackluster outlook as demand for a wide range of U.S. manufactured goods fell in January and jobless benefits claims rose for a second week.

The focus is now on fourth-quarter U.S. gross domestic product which, if it proves lower than the previous 5.7 percent, could steer prices down again, analysts said. This will be accompanied by consumer sentiment for February and existing home sales for January due later on Friday.

U.S. crude for April delivery rose 9 cents to $78.76 a barrel by 1017 GMT (5:17 a.m. EST)after falling $1.83 on Thursday.

ICE Brent crude for April fell 4 cents to $76.33 a barrel.

We saw quite a steep sell off yesterday in response to equities and economic data and the same sort of thing will drive it today. It is pausing, said oil trader Christopher Bellew at Bache Financial.

Oil markets have looked to equities and the broader economy for clues about the demand picture as the world economy pulls out of recession.

Doubts over the pace of the global recovery and fears that OECD demand has peaked have tempered optimism in oil markets, with the International Energy Agency (IEA) saying there is more downside risk to demand than upside.

$80 CEILING

Prices have traded in a range between $69 and $84 a barrel since last October, but $80 a barrel is being reinforced as a key resistance level, analysts said.

Prices edged over $80 a barrel to hit a six-week high of $80.51 a barrel on Monday but have since retreated. We are in a broad range and the top is around $80 a barrel, Bellew said.

While some analysts thought snow storms in the east coast of the United States could boost heating demand and set a price floor, others said that weather was now a peripheral factor because of high stocks.

U.S. crude oil stockpiles rose more than expected last week by 3 million barrels to reach a total of 337.5 million barrels in the week ending February 19, the U.S. Energy Information Administration showed on Wednesday.

Ample supplies have also lessened the market impact of geopolitical tensions over OPEC member Iran's uranium enrichment program, analysts said.

Israel lobbied the United States on Thursday to promote crippling sanctions against Iran to curb its nuclear program, but the Obama administration said it did not want to hurt the Iranian people.

One factor supporting oil on Friday was a fall in the dollar against a basket of currencies. A weaker dollar makes oil and other commodities more affordable for holders of other currencies.

World stocks also rose on Friday on upbeat economic data from Japan.

(Reporting by Emma Farge; editing by Sue Thomas)

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