Oil edges up, stabilising after drop

Enlarge Photo An oil facility is seen at Venezuela's western Maracaibo lake in htis November 5, 2007...

Fri, Jul 25 02:44 PM

LONDON (Reuters) - Oil prices rose slightly on Friday, finding some stability after two weeks of losses as buyers crept back into the market before the weekend.

Concerns that high prices and a weak U.S. economy will undermine demand have driven oil down more than $20 from a record peak above $147 a barrel earlier this month, but technical trading and a short-covering bounce helped buoy prices on Thursday.

U.S. light crude for September delivery rose 32 cents to $125.81 a barrel by 0822 GMT, off highs of $126.51. It gained $1.05 a barrel a day ago, recovering from a seven-week low.

London Brent crude rose 31 cents to $126.75 a barrel.

"We're definitely going to see some short-covering today after falling 15 percent in just over a week and as we approach the weekend," said Jonathan Kornafel, director, Asia, Hudson Capital Energy.

"Having said that, we can still head lower after some of the panic buying ahead of the weekend," he added.

U.S. stock markets fell by 2 percent or more a day ago after news of another drop in U.S. home sales, adding to the gloom surrounding the outlook for the world's top oil user.

European shares fell on Friday, tracking losses in the U.S. and Asian markets amid growing concerns about the health of the financial sector and the global economy.

"Since the source of much of the selling of the past 1-½ weeks has been the heightened attention to demand deterioration, we look for this market to place greater emphasis on sharp stock market sell-offs than currency movements going forward," said Jim Ritterbusch, president of Ritterbusch & Associates.

He added he expected crude could drop as low as $117 within about a week, while others said they expected trading to be volatile in a wide range.

"We have identified the $115-$140 interval as the most likely trading range for the quarter.... We would still see any price below $120 as representing a fairly strong buy signal," analysts at Barclays Capital said in a research note.

Even after the recent price fall, oil is up almost 30 percent in 2008 and is up six-fold from 2002 due to demand from growing economies such as China.

The U.S. Senate will vote on Friday on a Democratic bill that seeks to curb excessive speculation in the energy markets, but Republicans said they had the votes to block its passage.

(Additional reporting by Annika Breidthardt in Singapore)

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