25 Jul 2008

Oil rebounds from seven-week low

5:25 pm on 25 July 2008

Oil prices rebounded from a seven-week low on Thursday, with US light crude settling at $US125.49 a barrel, up $US1.05.

Traders were uncertain whether the rally would last, saying the increase was due to technical trading and a short covering bounce after recent declines left the market oversold.

London Brent crude settled at $US6.44, up $US15, after falling to a seven-week low of $US4.10 earlier.

Oil prices had been sliding from a record high set earlier this month on mounting fears that soaring energy costs and economic turmoil in the United States were cutting demand from the world's largest consumer nation.

Adding some support for prices on Thursday was a threat from a militant group to sabotage oil facilities in exporter Nigeria.

The main militant group in Nigeria's oil-producing Niger Delta said on Wednesday it would attack major oil pipelines in the next 30 days to prove it had not received payment from the government to end its campaign.

Crude futures reached a record high of $US147.27 on 11 July, which analysts said was tied to weakness in the US dollar which encouraged some investors to buy oil and other dollar-denominated commodities as a hedge against inflation and declines in other asset classes.