Oil rises above $68

OIL prices rose above US$68 a barrel yesterday as a rally fuelled by an improving economic and corporate outlook extended into a third week, even while analysts warned that market fundamentals did not support higher prices.

By mid-afternoon in Europe, benchmark crude for September delivery was up 37 cents to US$68,42 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose 89 cents to settle at US$68,05.Oil has rebounded from US$58,78 a barrel earlier this month as stronger economic results from the US and China boosted investor optimism.The Dow Jones industrial average has risen about 11 per cent 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 US fuel 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.’JBC Energy in Vienna said there was ‘considerable potential for a downward correction in the near term’ in oil prices.’The current optimism might be exaggerated, as expectations are outpacing real developments,’ JBC said. ‘It remains questionable how sustainable the current oil price rally is.’ -Nampa-AP