Oil rises above $126 as recent lows prompt fresh buying; falling fuel demand still weighs

SINGAPORE (AP) _ Oil extended a rebound Friday, rising above $126 a barrel after several declines over the past two weeks, although the market remains weighed down by the belief that falling fuel demand does not justify the recent high prices.

Light, sweet crude for September delivery rose 67 cents to $126.16 a barrel in electronic on the New York Mercantile Exchange by early afternoon in Singapore. The contract rose $1.05 to settle at $125.49 a barrel on Thursday.

Oil prices fell sharply the day before, tumbling $3.98 to settle at $124.44 a barrel, its lowest finish since June 4. Crude has fallen in six of the past eight sessions, and now sits nearly 15 percent below its peak above $147 a barrel earlier this month.

"The reality is that the fall of $20 per barrel has been fast and furious and really the fundamentals of the market that drove pricing to above $145 really have not changed," said Victor Shum, an energy analyst with consulting firm Purvin & Gertz in Singapore. "Some market participants simply view this as a 'buy' opportunity."

Investors' short covering — buying back rising securities which they had sold on speculation prices would fall — was another factor behind the rebound, Shum said.

The rebound in prices remained limited by concerns about demand destruction, however.

"U.S. oil consumption is down on the levels of a year ago and I think there is evidence of some adjustments in response to the high level of oil prices," said David Moore, a commodity strategist with Commonwealth Bank of Australia in Sydney.

Americans used 2.4 percent less fuel over the past four weeks than they did a year ago, the latest figures by the U.S. Energy Department's Energy Information Administration show. While that may not sound like much, industry experts say it represents a significant shift by the world's largest energy consumer, especially during America's summer driving season.

The data from the Energy Department also showed a bigger-than-expected increase in U.S. gasoline supplies, adding to concerns that drivers are cutting back.

Investors remained on guard over a threat Wednesday by Nigeria's main militant group that it will destroy major pipelines in the oil exporting country within 30 days. The threat — which only weeks ago might have caused oil prices to spike — did little to push crude higher.

In London, September Brent crude rose 56 cents to $127 a barrel on the ICE Futures exchange.

In other Nymex trading, heating oil futures rose 1.74 cents to $3.5845 a gallon (3.8 liters) while gasoline prices rose 0.72 cent to $3.0666 a gallon.

Natural gas prices rose 1.72 cents to $9.34 per 1,000 cubic feet. On Thursday, natural gas futures tumbled 46.5 cents to settle at $9.283 per 1,000 cubic feet, its lowest point since March, as a three-week sell-off of that fuel continued unabated.

Natural gas fell after the Energy Department's Energy Information Administration said in its weekly report that natural-gas inventories held in underground storage in the lower 48 states rose by 84 billion cubic feet to nearly 2.4 trillion cubic feet last week.

Investors hoping for an uptick in demand — and a reason to stop the fossil fuel's sharp decline — were looking for signs of a slower build. However, the Energy Department figure came in at the high end of a forecast range of 79 billion to 84 billion cubic feet provided by analysts surveyed by the energy research firm Platts.

• DENTAL ASSISTANT

• DESKTOP PUBLISHING

• CONSTRUCTION

• AUTO TECHNICIAN

• CAD MICROSTATION DRAFTER

• View all Top Jobs