London: Oil edged higher towards $76 a barrel on Monday boosted by a weaker dollar, but concerns about faltering economic recovery in some big oil consuming nations capped gains.
Japan’s economy expanded by a mere 0.1% in the second quarter. That followed a string of tepid US indicators last week that helped oil prices fall by more than 6%, the biggest weekly drop since early July.
“It’s quite natural to see a rebound after such a strong decline earlier,” Commerzbank analyst Carsten Fritsch said of oil’s small rally.
“Gains should be limited as the negative fundamentals prevail -- (including) a sharp growth slowdown in Japan, still the third-largest oil consumer in the world.”
US crude climbed 29 cents to $75.68 a barrel at 2:29pm. Prices touched $75.01 on Friday, the lowest for a nearby contract since 13 July. Brent crude gained 27 cents to $75.38.
Financial markets gave mixed signals for oil. European stocks fell as concern re-emerged about global economic growth. The dollar weakened against a basket of currencies, making oil cheaper for holders of other currencies.
Data releases on Friday showing a slight rise in US consumer confidence for early August and a small advance in retail sales in July were not enough to ease concerns over the strength of recovery in the world’s top oil consumer.
Oil last week also fell because of a rise in US jobless claims and sustained gains in the nation’s fuel inventories, further signs energy demand is trailing economic recovery.
Still, European economic growth accelerated in the second quarter of 2010 as Germany’s best growth performance since reunification more than made up for the struggles of Spain, Ireland and recession-ravaged Greece.
On the weather front, an area of low pressure moving over the Florida Panhandle was expected to track southward into the northern Gulf of Mexico by early Monday and had a 50% chance of becoming a tropical cyclone in the next 48 hours, the National Hurricane Center said on Sunday.
The Gulf is home to about 30% of US oil production, 11% of natural gas output and more than 43% of US refinery capacity.