Oil Slips But Stays Above $60 a Barrel

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VIENNA - Oil prices slipped but stayed well above $60 a barrel Thursday after a more positive economic outlook from the U.S. central bank buoyed investor confidence.

Prices were also supported by a larger than expected draw on U.S. crude stocks, implying an uptick in demand.

Benchmark crude for August delivery was down 58 cents to $60.96 a barrel by noon European electronic trading on the New York Mercantile Exchange. On Wednesday, the contract added $2.02 to settle at $61.54.

Oil surged Wednesday on signs from the Federal Reserve that the U.S. economy may be performing better than expected.

The Fed said industrial companies cut production far less in June than they had in previous months, and the central bank's minutes from its meeting last month showed it now expects the economy to contract at a slower pace than previously thought.

In addition to such positive economic signals, Vienna's JBC Energy said that "a 2.8 million barrel drop in U.S. crude stocks. a weakening U.S. dollar and news on strong GDP growth in China provided the basis for a rebound in international oil prices."

The Energy Information Administration said Wednesday that the country's supply of crude oil dropped more than expected last week, falling by 2.8 million barrels.

Inventories have dropped 13.2 million barrels during the last four weeks.

Oil had dropped to $58.78 a barrel last week from $73.38 on June 30 on investor concern that the global economy will emerge from recession slower than expected.

"The degree of short-run panic needed to stay below $60 has to be very considerable," Barclay's Capital said in a weekly energy report. "The situation would have to be weakening to a significant degree. That does not appear to be happening."

Stock investors, inspired by the Fed news and an upbeat outlook from chip maker Intel Corp., sent the Dow Jones industrial average up 3.1 percent on Wednesday.

In other Nymex trading, gasoline and heating oil for August delivery both slipped by nearly 2 cents a gallon to fetch $1.69 and $1.56. Natural gas for August delivery was flat at $3.28 per 1,000 cubic feet.

In London, Brent prices fell 80 cents to $62.29 a barrel on the ICE Futures exchange.

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

Copyright 2009 by The Associated Press.  All Rights Reserved. 

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George Jahn

George Jahn

Associated Press Writer

The Associated Press is the backbone of the world's information system serving thousands of daily newspaper, radio, television and online customers with coverage in all media and news in all formats. It is the largest and oldest news organization in the world, serving as a source of news, photos, graphics, audio and video.