OIL prices rose slightly above US$99 a barrel yesterday, supported by investors' faith in a bailout deal for Greece even as US crude demand lagged behind the overall improvement in the world's biggest economy.
By early afternoon in Europe, benchmark crude for March delivery was up 75 cents at US$99.46 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 30 cents to settle at US$98.71 on Wednesday.
In London, Brent crude was up 54 cents to US$117.74 a barrel on the ICE Futures exchange.
Greek leaders failed in talks lasting until early yesterday to agree on harsh austerity measures demanded by creditors in exchange for a new bailout of €130 billion (US$173 billion), but markets were optimistic that a deal would be reached soon.
"Hopes of a new bailout package for Greece, the weaker US dollar and the ongoing supply risks due to Iran, Sudan and Nigeria are giving buoyancy to oil prices," said a report from Commerzbank in Frankfurt. "Additional support is provided by the frosty conditions in Europe which weather experts predict will continue until the end of the month."
Crude has hovered near US$100 for the last few months as economic indicators, such as better than expected jobs data, suggests the US economy is strengthening.
However, US crude demand has been slower to pick up. The Energy Information Administration said Wednesday that US petroleum demand fell by 4.8 percent to a four-week average of 18.1 million barrels per day, the weakest four-week average since April 1997.
The EIA also reported that the US crude supplies increased by 300,000 barrels last week.
"There is striking discrepancy between indicators of US oil demand and indicators of the US economic backdrop," Barclays Capital said in a report. "Our economists anticipate that the growth in overall activity to gently accelerate through the remainder of this year, which stands in stark contrast to recent oil demand readings from the US"
Improving crude demand in developing Asian countries, led by China and India, should help bolster prices, Barclays said.
"The problem with judging the global pace of oil demand growth is that the epicenter of that growth has most definitely moved away from the US to Asia, and China in particular," Barclays said.
In other energy trading, heating oil was down 0.15 cent at US$3.1864 per gallon and gasoline futures added 1.07 cents to US$2.9859 per gallon. Natural gas fell 0.9 cent to US$2.457 per 1,000 cubic feet.