Oil prices rise towards 71 dollars on solid US data

LONDON (AFP) - Oil prices climbed towards 71 dollars per barrel yesterday as strong US economic news restored confidence to a market which had been rattled by American housing sector woes.

The price of Brent North Sea crude for October delivery added 53 cents to 70.39 dollars per barrel.

New York's main futures contract, light sweet crude for delivery in October, gained 81 cents to 70.64 dollars per barrel.

Official data showed yesterday that orders for durable manufactured goods in the US jumped 5.9 percent in May.

And sales of new US homes rose an unexpected 2.8 percent in July from the prior month, the Commerce Department said in a positive surprise for the battered housing sector.

Oil prices "rallied on the durable goods report which has installed some degree of confidence back into the market," said MF Global energy trading vice-president Bob Yawger.
"It's the first big economic news that says the economy is doing well since the beginning of this credit crunch.

"Combined with the housing news, it means we don't think there's going to be a big change to the demand numbers for oil."

In recent weeks, stock markets have been rocked by concerns about a credit crunch sparked by the flailing US housing market. Traders are concerned about the impact on world economic growth -- and crude oil demand.

Meanwhile, weak gasoline reserves in the United States underscored modest price gains yesterday, analysts said.

American gasoline or petrol reserves sank by 5.7 million barrels last week -- which was heavier than market expectations for a drop of 800,000 barrels.

"Conditions in the gasoline market are currently very tight and with demand in the US lingering around its all-time high, further gains from here are likely," said Barclays Capital analyst Kevin Norrish.

Oil prices had fallen earlier yesterday as traders expressed relief that Hurricane Dean had spared vital energy installations in the rig-heavy US Gulf of Mexico.

As Hurricane Dean bore down on Mexico, state oil company Pepex had evacuated all 18,000 personnel from its installations earlier this week, causing a production drop of 2.65 million barrels a day.

But Pepex restarted crude and gas production late Thursday, which helped ease concerns over supply.