Oil prices rebound strongly; Brent above 71 dollars

LONDON (AFP) - World oil prices jumped by more than a dollar yesterday after slumping last week on concerns about the US high-risk subprime mortgage sector, traders said.

The price of London's Brent North Sea crude for September delivery surged 1.22 dollars to 71.61 dollars per barrel in electronic deals.

New York's main futures contract, light sweet crude for delivery in September, soared 1.48 dollars to 72.95 dollars per barrel in floor trading.

"Crude futures were higher (yesterday), recovering from losses at the end of last week, amid improved sentiment on global financial markets," said analyst Andrey Kryuchenkov at the Sucden brokerage.

Crude futures had plunged in value last week, with London Brent diving by 7.4 percent and New York oil sliding by 5.8 percent, as traders feared that global energy demand may weaken amid the US subprime crisis.

Analysts at US investment bank Goldman Sachs said that the recent oil price losses, which were driven by speculators exiting the market, would be short-lived.

They added that prices would find support from tight global supplies and fierce demand for crude oil from the likes of China and the United States -- the biggest global energy consumers.

"With the continuing tightening of forward fundamentals, it is increasingly likely that the recent price declines driven by speculative length liquidation will prove to be short-lived," Goldman Sachs analysts said.

Prices were battered last week because players feared oil demand might slump in the wake of a global credit crunch.

Ongoing concerns over US subprime loan defaults sparked a bout of risk aversion, and analysts said the troubled US housing sector could well end up harming the worldwide economy.

Subprime, or high-risk, loans are those made to borrowers who do not qualify for conventional loans because they have a poor or no credit history.

Last Friday, Brent fell as low as 68.95 dollars per barrel, the lowest point since the start of June.

But the previous week, New York crude had rocketed to a historic high of 78.77 dollars per barrel on news of declining crude stockpiles in the United States, which is the world's biggest consumer of energy.

Elsewhere yesterday, Iran said its OPEC policy would not change owing to the sudden replacement of its oil minister.

President Mahmoud Ahmadinejad issued a decree late on Sunday which, in a surprise move, replaced oil minister Kazem Vaziri Hamaneh with the head of the national oil company, Gholam Hossein Nozari.

"There will definitely be no change in Iran's policy with regards to OPEC," an oil ministry official told AFP yesterday.

The International Energy Agency is urging OPEC nations to ramp up production, as it forecasts tight supplies heading into the northern hemisphere winter when demand for heating fuel shoots higher.

The Organization of Petroleum Exporting Countries is to meet in Vienna in September to make a decision about whether to change its output quota, but members have insisted that the oil market is well supplied.