Oil prices tread water after gains

March 30, 2010

, LONDON, Mar 30 – Crude oil prices paused on Tuesday, as traders digested bumper gains made the previous day, and awaited this week\’s weekly US energy inventories report, analysts said.

New York\’s main contract, light sweet crude for delivery in May, was unchanged at 82.17 dollars a barrel.

London\’s Brent North Sea crude for May eased three cents to 81.14 dollars per barrel.

"Currently range-bound oil prices are a result of optimism about a global economic recovery, clashing with still weak oil market fundamentals" of supply and demand, said analysts at the JBC Energy consultancy in Vienna.

Oil had spiked higher on Monday on the back of a weak US dollar, rising stock markets and hopes of economic recovery, as well as concerns after deadly suicide attacks on the Moscow metro.

"The price gain was primarily the result of a higher risk appetite on the back of firmer global equity markets, expectations of positive economic data and of a softer US dollar," added Commerzbank anlayst Carsten Fritsch.

"Obviously, bombing attacks in Russia, which is currently the world\’s top oil producing and exporting country, also contributed to the price rally."

Traders were switching their attention towards the US Department of Energy\’s weekly US oil inventories report, due Wednesday, which will indicate the extent of demand in the world\’s largest energy consumer.

"We\’ve been in sideways trading for a while and I think the market focus will be on the inventory data," said Tony Nunan, an energy risk manager with Mitsubishi Corp in Tokyo.

Across in Mexico, meanwhile, the world\’s biggest energy sector forum opens Tuesday to urge oil producers and consumers to help prevent a repeat of the excessive price volatility witnessed during the economic crisis.

The biennial International Energy Forum (IEF) kicks off two days of talks concluding with the publication of a ministerial declaration on Wednesday, set to call for joint action in tackling risks to price spikes and tumbles.

In the second half of 2008, supply concerns sent crude oil prices spiking to record highs of above 147 dollars a barrel before the severe global economic downturn sent them crashing to 32 dollars.

Prices have since recovered to trade between 70 and 80 dollars — a range which is pleasing both producers and consumers.

The oil price has now already reached a level that exceeds the range of between 70 and 80 dollars per barrel, which is considered to be the "most appropriate" oil price level according to the largest OPEC producer, Saudi Arabia," added Fritsch.

The market is also awaiting upcoming data this week that many analysts said would show an improving jobs situation in the United States.

US employment data is being closely watched worldwide because American consumers are a major driver for global growth.

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