Oil stays above $79 on stocks, Gulf storm

Oil prices held above $79 a barrel Friday in Asia as stock markets rallied and a storm threatened oil operations in the Gulf of Mexico.

Benchmark crude for September delivery was down 19 cents to $79.11 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

The contract surged $2.74 on Thursday to settle at $79.30, a 10-week high, as stock markets jumped on better-than-expected second quarter corporate earnings. The Dow Jones industrial average rose 2 percent Thursday and most Asian equities gained Friday.

Crude had wavered in the mid-$70s this month before Thursday’s breakout, suggesting investors have renewed confidence the global economic recovery is on track.

“For now, investors believe the global market place will make it out of the funk we are currently in and the markets will trade higher,” Sander Capital said in a report. “The world is still going to grow and consumption of raw materials is still going to take place.”

Traders are also eyeing Tropical Storm Bonnie, which could reach the Gulf by Saturday. The federal government has ordered some ships involved in the BP oil spill cleanup to return to port and Shell Oil has begun evacuating nonessential employees from its Gulf operations. Other energy companies in the Gulf are considering evacuations as well.

As of Thursday, Bonnie had maximum sustained winds of 40 mph (65 kph), and was centred about 165 miles (265 kilometres) southeast of the Bahamian capital of Nassau, the National Hurricane Centre in Miami said. The storm has already caused flooding in Puerto Rico, the Dominican Republic and Haiti.

In other Nymex trading in August contracts, heating oil fell 0.45 cent to $2.0579 a gallon, gasoline was steady at $2.1468 a gallon and natural gas rose 1.2 cents to $4.655 per 1,000 cubic feet.

Brent crude was down 27 cents to $77.55 a barrel on the ICE futures exchange.