Oil rises above $60 on signs Asia growth reviving

Signs that Asia might be emerging from its economic slump hoisted oil prices back above $60 a barrel Tuesday.

The move into positive territory did not reflect long-term demand, however, with OPEC predicting any upturn in global appetite for crude would be modest and not come before next year.

Benchmark crude for August delivery was up 77 cents to $60.46 a barrel by afternoon in European electronic trading on the New York Mercantile Exchange. On Monday, the contract fell 20 cents to settle at $59.69.

Singapore said Tuesday its economy surged by an annualized 20.4 percent in the second quarter, adding to hopes that Asia could lead the world out of recession and fuel crude demand.

Crude prices have hovered around $60 a barrel for the last few days _ pausing after a drop from an eight-month intraday high of $73.38 on June 30 _ as concern about a struggling U.S. economy undermined investor optimism. And with the market following larger economic trends, prices appeared ready to go either way in the short run.

"It is evident that this market is consolidating and building steam for a break out of the current retracement area," wrote trader and analyst Stephen Schork in his Schork Report. "We think that a break above this area clears a path back towards $75 and a break below creates a template for a flush towards $50."

For now, Asia seems to have the most potential to boost prices.

"There's evidence that Asia, led by China, is turning around quite quickly," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "That's where the demand growth potentially will be."

China, the world's third-largest economy, is scheduled to announce GDP figures later this week.

Moore said crude will likely average about $60 a barrel in the third quarter as signs of economic recovery in Asia are offset by weaker results in the U.S. and Europe.

"We might see quite strong GDP from China, and then some U.S. data that's pretty subdued," Moore said. "I think that's the game we're in for during the next few months."

An attack by Nigerian militants on oil installations in Lagos also bolstered prices. Rebels set fire to an oil depot and loading tankers on Sunday, killing five people in the group's first attack outside the southern oil-rich Delta region.

The latest monthly report from the Organization of the Petroleum Exporting Countries reinforced expectations of long-term demand weakness. OPEC said demand would not turn positive before 2010 and even then the uptick would amount to only 500,000 barrels a day _ with overall demand actually continuing shrink in major industrialized countries and increasing only in developing economies such as China.

Demand for OPEC oil _ more than a third of what's on world markets _ is expected to average 28.5 million barrels a day this year, a daily drop of 2.3 million barrels over 2008. Demand for OPEC oil will continue to shrink into next year, the report said.

In other Nymex trading, gasoline for August delivery rose by more than a penny to $1.65 a gallon and heating oil gained close to 2 cents to fetch $1.52. Natural gas for August delivery jumped by close to 10 cents, selling for $3.36 per 1,000 cubic feet.

In London, Brent prices rose 78 cents to $61.47 a barrel on the ICE Futures exchange.

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Associated Press writer Alex Kennedy contributed to this report from Singapore.