960425

European oil

prices rally

LONDON: Oil prices staged a modest

recovery following two straight days of heavy losses as traders

reassessed short-term direction.

The market continued to ride a rollercoaster in volatile

trade. After opening at $19.80 a barrel on Thursday, benchmark

North Sea Brent crude for June delivery fell as low as $19.41

before recovering by 1530 GMT to $20.18. On Wednesday, June

Brent closed at $19.88, which was 35 cents down on the day.

On Tuesday and Wednesday, traders rushed to take profits

following a gain of more than $2.00 a barrel in the three

previous trading days.

Now that talks between Iraq and the U.N. on a limited Iraqi

oil sale have recessed until some time in May, traders are

taking a closer look at short-term supply demand fundamentals,

they said.

"We have already had 77 days (duration of the U.N./Iraqi

talks so far) of agony and want to take a breather," said Peter

Gignoux, head of London energy desk at Smith, Barney.

The head of Iraq's team, Abdul Amir al-Anbari, said he was

hopeful that the next round would clinch the deal but he has

been strongly critical of proposed changes to the plan that

would allow Iraq to sell some oil for humanitarian reasons.

Iraq has been under stringent U.N. sanctions since invading

Kuwait in August 1990. The "oil for food" scheme would enable it

to sell $2 billion worth of oil every six months in order to buy

food, medicine and other humanitarian goods to help those worst

hit by the effects of the embargo.

The prospect of about 700,000 barrels per day of Iraqi crude

hitting the market has offset an otherwise bullish market.

Extremely low U.S. oil stocks and good refined product

demand have fuelled the prolonged rally which sent oil prices to

post-Gulf War highs.

A biting winter combined with near 20-year lows in heating

oil stocks. Now that temperatures are rising and Americans are

taking to the roads, the effect is likely to be repeated with

gasoline, traders said.

"There are the ingredients for an active market in gasoline

as the summer months approach which is highly likely to lead to

support for crude prices," oil analysts at Morgan Stanley said

in a weekly bulletin.

The U.S. Department of Energy has predicted that gasoline

demand will hit a record eight million barrels per day this

summer, up 2.1 percent from last year.

Crude prices in dollars a barrel at 1530 GMT:

April 25

April 23

(close)

Dated Brent

$20.75

$20.43

IPE London Brent futures

(June)

$20.18

$19.88

NYMEX light crude futures (June)

$22.58

$22.40-Reuter