Oil up slightly as market takes breather from sharp, 2-day drop to 8-month lows

NEW YORK, N.Y. – The price of oil rose Friday following a two-day drop that pushed crude to its lowest level since October.

Benchmark West Texas Intermediate crude increased $1.32 to US$79.52 a barrel on the New York Mercantile Exchange, though it was still down more than five per cent for the week.

Brent crude, which is used to price oil imported by many U.S. refineries, climbed $1.52 to US$90.76 a barrel in London.

Prices rose Friday after leaders of Germany, France, Italy and Spain said they would push for a $163-billion growth package. Any revival of Europe’s flagging economy could boost energy demand in the region and increase oil consumption.

Meanwhile, a storm in the Gulf of Mexico is helping push oil prices higher. A system along the Yucatan peninsula and western Cuba could strengthen into a tropical cyclone within two days, according to the U.S. National Hurricane Centre. Tropical storms and hurricanes can disrupt production of oil in the Gulf.

“Even if the storm doesn’t do any major damage, it could still slow down imports,” coming in on ships, said Phil Flynn, an analyst with Price Group.

Oil prices tumbled earlier this week on signs of a weakening economy. If businesses and people use less energy, demand for oil falls. Rising supplies are also weighing on prices. U.S. supplies are at their highest level in 22 years, thanks to a production boom in North America.

In other futures trading, heating oil added a penny to US$2.535 a U.S. gallon (3.79 litres), while wholesale gasoline added 1.7 cents to US$2.567 a gallon. Natural gas rose by 6.1 cents to US$2.643 per 1,000 cubic feet.