Oil hovers around 79 dollars in Asian trade

July 26, 2010

, SINGAPORE, Jul 26 – Oil prices extended gains in Asian trade on Monday as investors awaited the European market\’s reaction to last week\’s bank stress test results and as a US storm threat eased, analysts said.

New York\’s main futures contract, light sweet crude for delivery in September, edged up nine cents to 79.07 dollars a barrel, while Brent North Sea crude for September rose 19 cents to 77.64 dollars.

"The oil market is likely to extend its gains, although they could be quite muted, while waiting for the European market to open. Support will come from the strong US equities markets on Friday," Serene Lim, a Singapore-based oil analyst with Australia\’s ANZ bank, told AFP.

The market\’s gains on Friday were helped by rising US equities as encouraging company earnings propelled Wall Street stocks to their best levels in a month but were pared back after the stress test results were released.

Many analysts questioned the rigour of the assessments after the results showed that seven banks, mainly in Spain, had failed the tests, out of 91 banks assessed for resistance to economic upheaval.

"Up to now the Asia markets have some scepticism that the stress tests on the European banks were not strict enough so they will be looking at the European reaction," Lim said.

Prices were also capped after the threat of Tropical Storm Bonnie eased at the weekend and fears that it could damage oil production platforms in the Gulf of Mexico faded, Lim said.

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