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THE NEW YORK TIMES: Oil Rebounds Toward $70 After Two – Day Dip

Oil Rebounds Toward $70 After Two – Day Dip

Published: May 16, 2006

Filed at 11:23 p.m. ET

SEOUL (Reuters) – Oil prices edged higher for a second day toward $70 a barrel, bouncing from sharp losses sparked by worries that high prices were denting demand.

U.S. light crude oil (CLc1) was up 25 cents at $69.78 a barrel by 0130 GMT in Asian trading. On Tuesday, it gained a modest 12 cents after the previous session's sharp drop in prices as investors feared high crude and materials prices could slow demand for oil and hurt economic growth.

“A big fall on Monday was triggered by the IEA (International Energy Agency) report saying demand was being adversely affected by high prices. A lot of that is already built in the prices,'' said Tony Nunan, assistant general manager of risk management at Mitsubishi Corp.

Support for crude and gold prices came from Tuesday's government data. It showed U.S. producer prices, excluding food and energy, rose less than expected last month, helping soothe inflation worries and encouraging speculation the Federal Reserve may be able to end its campaign of interest rate rises.

A partial loss of crude exports from Nigeria and concern over possible disruptions from Iran amid its nuclear dispute continued to support oil prices.

“The market is in medium and longer term sill bullish,'' Nunan said.

“We are not out of the woods yet as far as Iranian nuclear issue is concerned. And also U.S. gasoline situation is still not clear and Hurricane season is on the horizon,'' he added.

Concern that a standoff between Iran and the West over Tehran's nuclear ambitions could cut exports from the OPEC member have been one factor behind high oil prices this year.

Traders were looking ahead to U.S. government data of petroleum inventories due to be released later on Wednesday.

In an expanded Reuters poll of 16 industry analysts, average forecasts called for a 1.6 million barrel rise in gasoline inventories amid lower demand and higher refinery production.

The poll also showed expectations for a 500,000 barrel draw on crude oil and a 700,000 barrel increase in distillate stocks, which include diesel fuel and heating oil.

Royal Dutch Shell Plc (RDSa.L) said on Tuesday it expected to return in coming weeks to the Nigerian facilities it was forced to shut down in the face of militant attacks.

Shell has lost 455,000 barrels per day (bpd) of oil output due to the attacks.

Any disruptions in Iran's crude oil exports can be covered by the 26 countries that belong to the International Energy Agency for more than four years, a U.S. Energy Department official said on Tuesday.

The United States move toward normalized ties with Libya will give the OPEC producer greater access to equipment it needs to boost oil production capacity, Libya's top oil official said on Tuesday.

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