Oil prices rise as IEA raises oil demand forecast

Oil prices ended slightly higher Friday after the IEA said crude demand should grow at the end of this year and in 2010 as the global economy recovers. After a volatile week in which New York prices gained up to nearly two dollars, the market gave in to profit taking early Friday before bouncing back again, oil traders said.

The mostly weak dollar, which has fueled prices in recent weeks, rebounded Friday and kept a lid on prices after Federal Reserve Chairman Ben Bernanke hinted that US interest rates could be on the rise.

A hike in the US interest rates would make the dollar more attractive to investors. “Market is flat after a pretty active week,” said analyst John Kilduff of MF Global. “The big focus is on the dollar. The rebound keeps a lid on all commodities, like gold and also oil,” he said.

Kilduff said a report by the International Energy Agency “is confirming the thesis that the recovery globally is well under way,” giving room for further price rises.

Oil demand is firming but the global market is still weak amid concerns over economic recovery and its impact on energy consumption next year, the International Energy Agency said Friday.

Demand should grow at the end of this year and in 2010 as the global economy rises after the crisis, but there is a wide range of risk in how the groggy oil market will recover and the oil price is unlikely to rise much.

Oil prices closed up more than two dollars a barrel on Thursday as investors sought refuge in commodities amid a weakening dollar and as economic recovery won a lift in the United States, traders said. Crude oil prices have also won support this week on a report that Gulf states considered dropping the greenback for oil transactions.

Tags:  IEA, oil prices