Oil rises towards $79 after U.S. GDP data

 @ibtimes on February 26 2010 10:32 AM

Oil rose toward $79 a barrel on Friday, after sliding more than 2 percent the previous session, as an upwards revision in U.S. gross domestic product for the fourth quarter helped revive lackluster sentiment.

The U.S. economy grew faster than initially thought at 5.9 percent versus 5.7 percent in the fourth quarter, a government report showed on Friday, boosting expectations for fuel demand growth in the world's top energy consumer.

The previous day, sentiment worsened after data showed demand for a wide range of U.S. manufactured goods fell in January and jobless benefits claims rose for a second week.

U.S. crude for April delivery rose 74 cents to $78.91 a barrel by 1511 GMT (10:11 a.m. EST) after falling $1.83 on Thursday. Prices earlier rose more than $1 to a high of $79.34 a barrel, but then pared gains after sales of previously owned homes in the United States unexpectedly plunged in January.

ICE Brent crude for April rose 56 cents to $76.85 a barrel.

The GDP number was positive and the crude market was getting a little oversold yesterday. Even with the terrible economic news earlier in the week -- consumer confidence, housing stuff -- equities have been quite resilient, said senior market strategist Richard Ilczyszyn at Lind-Waldock.

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, said oil trader Christopher Bellew at Bache Financial.

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, data from 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 programme, analysts said.

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

The market shrugged off a rise in the dollar versus the euro on Friday. A stronger dollar tends to weigh on oil as it makes it more expensive for holders of other currencies.

(Additional reporting by Robert Gibbons in New York and Seng Li Peng in Singapore; Editing by Michael Urquhart)

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