Oil prices rose towards $59 today as European equities opened higher, shrugging off gloomy German economic data and a firmer dollar.
Europe's main stock indexes started stronger today despite data showing Germany's gross domestic product (GDP) plunged by a record 3.8 per cent quarter on quarter in the first three months of the year, much worse than expected.
US crude for June delivery rose 20 cents to $58.82 a barrel at 8.02am, but London Brent for July delivery fell 9 cents to $58.50 in its first session of trade as the new front-month contract.
Crude prices were just a notch higher from last week's close, after moving in lockstep with the stock market and rising against a bearish report by the IEA a day earlier.
The dollar gained against the euro after the release of Germany's disappointing GDP numbers. A stronger dollar makes oil more expensive and less attractive to holders of other currencies.
US oil prices breached $60 a barrel during intraday trading on Tuesday but settled below $59 after the US Department of Energy slashed its 2009 oil demand forecast.
Oil prices have been tracking equities markets in recent months as traders look to stocks for signs of an economic recovery that could lift ailing world fuel demand.
While Germany's GDP figures weighed on optimism for the economy, preliminary data out of France showed the country's first-quarter GDP met expectations, falling 1.2 percent from the previous quarter.
“I don't expect oil demand to recover any time soon," Astmax's Emori said.
Paris-based IEA, an adviser to 28 industrialized nations on energy policy, forecast a day earlier that world oil demand this year would fall the most since 1981.
IEA said the rise in oil prices to a six-month high above $60 this week was due to sentiment rather than fundamentals.
The US Energy Information Administration and OPEC also cut their forecasts for energy demand in recent days.
The Organization of the Petroleum Exporting Countries (OPEC), which has announced 4.2 million bpd of production cuts since September in a bid to tighten the market, also pumped more oil last month than in March, the IEA said.
Reuters