Oil prices climb towards 72 dollars

LONDON: Oil prices headed higher towards 72 dollars a barrel on Friday, spurred by hopes that the worst is over for the ailing global economy, analysts said.

New York's main futures contract, light sweet crude for delivery in July, advanced 44 cents to 71.81 dollars a barrel.

In early London trade, Brent North Sea crude for August delivery climbed 43 cents to 71.49 dollars.

"I think the general mood is that we're past the worst of the downturn," said Mark Pervan, a senior commodities analyst with ANZ Bank.

"It continues to be a pre-emptive market in a sense that they are pricing on positive news."

Positive US data and stronger demand has energised the market in recent days, analysts said.

The US Department of Energy this week reported a sharper-than-expected fall in crude inventories, suggesting a hike in demand.

On Thursday meanwhile, a US business research firm said the index of leading economic indicators, a measure of conditions in the coming months, increased 1.2 per cent in May from the previous month, beating market expectations.

The index had been on a downward trend since hitting a peak in July 2007, the Conference Board said.

Developments in the recession-hit US economy are closely monitored because it is the biggest in the world and is a major buyer of the world's exports.

Pervan said crude prices were also closely pegged to the value of the dollar, which has been under pressure.

"I think there's still a high correlation with the dollar," he said.

A weaker US currency makes dollar-priced crude cheaper for buyers holding stronger currencies. That tends to stimulate demand and push the market higher.

Oil prices touched multi-year lows of around 32 dollars in December as the economic slowdown crushed demand for energy but have slowly clawed back since.