Oil: Prices rebound from 10-week low

NEW YORK - Oil prices rebounded from 10-week lows on Monday as speculative buying stemmed a losing streak that had been triggered by swelling US crude stocks and high Opec production.

"It looks like some locals and funds came in and pushed it above US$50 and found some buy stops there," said Marshall Steeves, analyst at Refco Group.

US light crude surged US$1.20 to US$50.92 a barrel after dropping as low as US$49.03 a barrel earlier in the day, the lowest since Feb. 22. Prices remained about 13 per cent below the record US$58.28 struck on April 4.

Markets were closed in London for the May Day holiday.

Oil prices have been under selling pressure since last month's record due to soaring crude stockpiles in the United States, the world's largest energy consumer.

Last week as US crude stocks jumped by a surprising 5.5 million barrels as imports rose to almost 10.9 million barrels per day (bpd), the third-highest weekly volume on record.

The Organisation of the Petroleum Exporting Countries has increased supplies to cool prices down to below US$50 a barrel, which has helped to build US crude stockpiles to the highest level since mid-2002.

The cartel has an official production ceiling of 27.5 million barrels per day (bpd), excluding Iraq.

"Since our last meeting in Isfahan (in mid-March) until now, there is 2 million that has been added to the market, " Opec President Sheikh Ahmad al-Fahd al-Sabah said on Monday.

"When we were in Isfahan ... the (Opec 10) production was 27.7 million and now our real production is 29.7 million. "

Including Iraqi production, Opec's current output would beat levels of over 30 million bpd pumped late last year that took Opec supply to 25-year highs.

Sheikh Ahmad had said the cartel would add 500,000 bpd of fresh supplies to world oil markets starting from May. But he said that "by numbers, we already have more than 500,000 of real production in the market. "

Opec, which controls half the world's crude exports, meets again on June 15 in Vienna to chart production strategy for the second half of the year.

Most of the 10 Opec members with quotas -- Iraq is excluded -- are now producing at full tilt as the exporter group seeks to encourage stockbuilding in the coming months to create a buffer for strong demand later this year.

But dealers remain concerned over a potential petrol supply crunch in the peak-demand summer months or a shortage of heating fuel toward the end of the year as the Northern Hemisphere heads into winter.

Some analysts worry that high commodity prices are starting to slow world economic growth by fueling inflation and prompting an increase in interest rates globally .

"We continue to think that the high oil price hurts the economy," Claude Mandil, the head of the International Energy Agency, told reporters on the sidelines of the group's biannual ministerial meeting.

The US economy grew at its slowest pace in two years during the first quarter -- an annual rate of 3.1 per cent -- fanning concerns of a possible slowdown in oil demand growth.

- REUTERS