SINGAPORE - Crude oil prices traded in a narrow range on Thursday in Asia after rebounding several dollars on the US government's bailout of insurance giant American International Group (AIG), dealers said.
New York's main contract, light sweet crude for October delivery, was 16 cents lower at 97.00 dollars a barrel. The contract surged 6.01 dollars to 97.16 at the close of floor trading Wednesday on the New York Mercantile Exchange.
Brent North Sea crude for delivery in November was unchanged following a gain of 5.62 dollars to 94.84 dollars Wednesday in London.
Prices traded near 90 dollars at the start of the week after US investment bank Lehman Brothers filed for bankruptcy while another Wall Street firm, Merrill Lynch, was forced to sell itself to Bank of America for 50 billion dollars.
Victor Shum, of international energy consultancy Purvin and Gertz in Singapore, said prices recovered after the US Federal Reserve on Tuesday announced an unprecedented rescue loan of up to 85 billion dollars to save AIG.
The move aimed to head off the company's collapse which was expected to lead to a global financial calamity in a crisis that grew out of the US subprime, or higher-risk, mortgage sector.
"The market got oversold a couple of days ago reacting to all this bad financial news," Shum said.
"We are bound to see a lot of volatility in oil."
Shum said oil prices had also received some support from a reduction in production and refining after recent hurricanes that hit the Gulf of Mexico.
There was some flight to oil as a "safe haven" during the financial turmoil, although oil is not as good a haven as gold because economic troubles could further hit oil demand, Shum said.
Oil prices have fallen heavily from record levels above 147 dollars in early July, on worries the global economy is slowing and causing a dent in energy demand.
But prices gained some recent strength from attacks this week on oil facilities in key African producer Nigeria, Shum said, although he added that factor would have been stronger without the global financial worries.
Armed Nigerian militants who have declared an "oil war" in the south of Nigeria claimed Wednesday to have blown up a major pipeline it believed was operated by Royal Dutch Shell and Italy's Agip.
The latest report on US energy stockpiles by the country's Department of Energy (DoE) provided additional backing for prices.
DoE said the consumption of oil-based products has fallen 4.4 percent in the past four weeks compared to the same period last year.
The department also said crude reserves sank 6.3 million barrels in the week ending September 12 when US energy production was severely hampered by Hurricane Ike in the Gulf of Mexico.
"I think longer-term the trend is that the fundamentals will still support a strong price for oil," Shum said.
as of 09/18/2008 12:51 PM
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