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Oil prices climb as equity markets rally on bullish US and European data

8th Mar 2010, 3:01 pm Oil prices climb as equity markets rally on bullish US and European data

Oil prices edged higher after retreating from recent highs of over $82 on improving demand outlook following a series of positive economic updates that came out in the US and Europe over the past week.

On Friday, US non-farm payrolls update showed just 36,000 jobs lost compared to the expected decline of up to 70,000, while consumer credit data revealed the first increase in borrowings a year. In Europe, Greece moved closer to resolving its debt problem after unveiling a fresh economic austerity package and conducting a successful bond issue that raised the debt laden country €5 billion to help it meet its near term commitments.

Crude demand outlook improved as equity markets rallied over the past week and rose today with Asian stocks surging and the FTSE 100 adding 0.2% on top of its weekly gain of 4.6% to eclipse 5,600 and hit fresh 18 month highs.

Also on Friday, it was reported that OPEC (Organization of Petroleum Exporting Countries) will cut shipments by 2.3% in the month ending 20 March to drive up crude price. However, Ecuador’s oil minister Germanico Pinto, who currently holds the organization’s rotating presidency, said that there is no need for a supply cut.

April Brent Crude improved to US$80.28/barrel, while US light, sweet crude rose to US$81.89/barrel.

Blue chip oil and gas producers showed little movement today. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) and BG Group (LSE: BG) were flat, while Cairn Energy (LSE: CNE) posted a small loss and Tullow Oil (LSE: TLW) slid 1.2%.

Amec (LSE: AMEC) lost 1.5%, while fellow oil and gas engineering firm Petrofac (LSE: PFC) rallied 5% after reporting on its full year results.

Most midcaps were on the rise with the exception of Dana Petroleum (LSE: DNX), which lost 1.2%, and Salamander Energy (LSE: SMDR), which shed less than 1%.

Heritage Oil (LSE: HOIL) was the top performer in the group, advancing 1.6%. JKX Oil & Gas (LSE: JKX) climbed 1.2%, while Dragon Oil (LSE: DGO), Melrose Resources (LSE: MRS), Premier Oil (LSE: PMO) and Soco International (LSE: SIA) tacked on less than 1%.

Services companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) were flat.

Africa focused energy company Dominion Petroleum (AIM: DPL) led the juniors, surging 14%. Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) followed, adding 6.5%.

North America focused oil & gas junior Pantheon Resources (AIM: PANR) was in decline, shedding 10.5%.

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