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VIENNA, Austria (AP) - Oil prices rose Friday, extending the previous day’s gain of more than $2 a barrel as U.S. trade deficit figures spurred hopes that the U.S. economy might escape a serious downturn.
Gasoline futures surged by more than 4 cents a gallon.
The March contract for light sweet crude on the New York Mercantile Exchange rose 99 cents to $96.45 a barrel in electronic trading by afternoon in Europe.
Brent crude futures rose 6 cents to $95.22 a barrel on the ICE Futures exchange in London.
The U.S. Commerce Department said Thursday the trade deficit fell in December and for 2007 as a whole - an indication the U.S. is exporting more goods. This led investors to think U.S. energy demand would not be as weak as feared.
U.S. Federal Reserve Chairman Ben Bernanke’s suggestion that the central bank is prepared to again cut interest rates also helped boost light, sweet crude by $2.19 to settle at $95.46 a barrel Thursday in New York.
That was its highest close since Jan. 9. The contract has risen in 4 of the past 5 sessions, adding more than US$6 in a little over a week.
“Energy prices are strong,” proclaimed the Schork Report, edited by energy analyst Stephen Schork, saying that benchmark crude “despite Bernanke’s ’sluggish’ view of the U.S. economy appears primed for another run at $100.”
Bernanke said the Fed is ready to act again in response to deteriorating economic conditions. Interest rate cuts support oil prices because they tend to weaken the dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.
Energy investors were also buying after a federal judge’s decision Wednesday to confirm an earlier ruling freezing $300 million in a bank account owned by the Venezuelan state oil company.
Exxon Mobil is challenging Venezuela’s nationalization of an oil project. A British court’s earlier decision to temporarily freeze up to $12 billion in Venezuelan oil assets drew threats from President Hugo Chavez to cut off all oil sales to the U.S.
Prices gained despite forecasts this week from the Energy Department and the International Energy Agency, an energy policy adviser to the industrialized world, that call for slower demand growth this year due to weakening economies.
That sentiment was echoed by the Organization of Petroleum Exporting Countries. It said Friday that weakening world economic growth and demand prospects and ongoing increases in U.S. and European crude and gasoline inventories may lead it to reduce output in efforts to avoid a steep fall in prices.
In its monthly report, OPEC, responsible for about 40 percent of global oil production, cut its 2008 global oil demand growth forecast by 100,000 barrels a day to 1.2 million barrels a day - an increase of about 1.4 percent from this year.
OPEC is scheduled to meet March 5 in Vienna to review its production policy.
Heating oil futures were up 1.39 cents to $2.6805 a gallon while gasoline price surged over 4 cents to $2.5179 a gallon.
Natural gas futures were basically flat at $8.777 per 1,000 cubic feet.

by AOL

“Traders still focus on worries about the Exxon Mobil (XOM, Fortune 500) versus Venezuela contest as well as hopes that the U.S. may sidestep a possible economic recession,” said Tim Evans, an analyst at Citigroup, in a research note.

Word that the U.S. has given international nuclear regulators evidence that diplomats say shows Iran is actively trying to build a nuclear bomb gave investors another reason to buy.

But many analysts questioned oil’s recent price strength, arguing that underlying supply and demand fundamentals suggest prices should be falling.

“I actually cannot justify this rally,” said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill, echoing the sentiments of many.

Indeed, forecasts this week from the Energy Department and the International Energy Agency, an energy policy adviser to the industrialized world, call for slower demand growth this year due to the weakening economy.

At the pump, meanwhile, gas prices rose 0.7 cent overnight to a national average of $2.979 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, have inched higher in recent days in response to oil’s move higher.

Other energy futures also rose Thursday. March heating oil futures added 5.1 cents to settle at $2.6666 a gallon on the Nymex while March gasoline futures rose 8.62 cents to settle at $2.4761 a gallon.

Venezuela wants to beat Exxon

IEA: Economic woes to hit oil demand
by CNN