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Oil rises despite dismal demand numbers

OIL prices hopped above US$58 a barrel yesterday even though U.S. unemployment continued to rise and a new report predicted the world's petroleum appetite will shrink even more than expected this year.

Benchmark crude for June delivery climbed 60 cents to settle at US$58.62 a barrel on the New York Mercantile Exchange. Prices fell as low as US$56.55. In London, Brent prices lost 65 cents to settle at US$56.69 a barrel on the ICE Futures exchange.

And natural gas futures fell despite a government report that showed storage levels did not rise as much as expected last week. Stores of natural gas, a major energy source for power plants, have been building since mid-March as factories shut down and people lose jobs. They remain well above historical levels.

Energy prices have recently neared five- to seven-year lows in a global economic downturn. Refiners have slashed production of gasoline in anticipation of fewer sales, which is part of the reason why prices at the pump are going up. Gasoline futures are rising on Nymex as well.

U.S. retail gas prices rose to a new national average of US$2.281 a gallon (about 60 cents a liter) overnight, according to auto club AAA, Wright Express and Oil Price Information Service. That's about 23 cents more per gallon than last month, but still about US$1.48 cheaper than a year ago.

Energy prices dropped early in the day as the Paris-based International Energy Agency said it now expects global oil consumption to fall 3 percent in 2009, or about 2.6 million fewer barrels a day than last year.

It was the ninth consecutive monthly cut the IEA has made to its forecasts.

The U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries already cut demand expectations this week.

Meanwhile, the Labor Department reported that new jobless claims rose to a seasonally adjusted 637,000 last week - above analysts' expectations of 610,000 - while continuing jobless claims jumped to 6.56 million from 6.36 million, also higher than analysts expected.

In other Nymex trading, gasoline for June delivery added 3.49 cents to settle at US$1.7237 a gallon as the summer driving season was set to kick into gear with an expected increase in Memorial Day traffic.

Heating oil added less than a penny to settle at US$1.4947 a gallon. Natural gas for June delivery dropped 4.1 cents to settle at US$4.292 per 1,000 cubic feet.


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