Oil pushes above US$97 a barrel despite shrinking eurozone economy

NEW YORK, N.Y. – The price of oil rose above US$97 per barrel Thursday, reversing Wednesday’s small drop despite reports showing continuing economic weakness in the eurozone.

In morning trading in New York, benchmark West Texas Intermediate crude rose 52 cents to US$97.53 per barrel. Brent crude, which is used to price oil that many U.S. refineries buy to make gasoline, was unchanged at US$117.88 in London.

Crude rose sharply in early January, then began to waver between US$95 and US$98 per barrel, where it has stayed for the past month.

Eurostat, the EU statistics office, said the eurozone economy shrank by 0.6 per cent in the final quarter of 2012 from the previous three-month period, which was more than the 0.4 per cent drop expected by markets. Germany, Europe’s largest economy, also shrank by 0.6 per cent for the period.

Addison Armstrong, an analyst at Tradition Energy, said oil prices have remained high because investors are using the cheap credit brought on by low interest rates to invest in commodities. Also Saudi Arabia has reduced its output somewhat, shrinking world supplies slightly. And the U.S. and Chinese economies appear to be getting healthier.

Armstrong does not expect oil to continue to rise, however, because supplies are ample and demand is about flat. “I don’t expect we’ll revisit the highs we saw last year,” he said. “The fundamentals are going to reassert themselves soon.”

There is some disagreement on just how much the oil the world economy needs. On Wednesday the Paris-based International Energy Agency lowered its consumption forecast by 85,000 barrels a day compared with data from a month ago. On Tuesday OPEC raised its 2013 forecast for global demand, citing signs of recovery in the global economy.

The IEA expects the world to use 90.7 million barrels of crude oil a day this year. That is one million barrels a day more than OPEC’s estimate of 89.7 million barrels a day.

In other energy futures trading on the Nymex: wholesale gasoline rose six cents to US$3.10 a U.S. gallon (3.79 litres) and heating oil was flat at US$3.22 a gallon.