Thats an interesting if not unexpected turn of events...
LONDON (AFP) — Oil prices rallied above 106 dollars Monday, shaking off early losses caused by concerns over weak demand for crude in traditionally energy-hungry Japan and the United States, traders said.
New York's main oil contract, light sweet crude for delivery in May, jumped 81 cents to 106.48 dollars per barrel.
Brent North Sea crude for May climbed 1.23 dollars to 105 dollars.
"Despite expectations for declining oil demand growth amid a US-led global slowdown, supply and demand factors are still tight ... (and) any supply shocks are still likely to have a large effect on crude prices," said Sucden analyst Nimit Khamar.
Oil prices had fallen earlier on Monday owing to worries about sliding energy demand in the world's two richest countries, analysts said.
"Weighing on crude prices was poor industrial output data in Japan, which is seen as key to Japan's economic growth outlook, sparking further fears of slowing oil demand growth in the third largest oil consuming nation," said Khamar.
Worries about the US economy also lingered.
"The combined impact of a weakening economy and high oil price inflation are putting pressure on total US oil demand, which has declined by four percent from a year ago and is now at the lowest levels since 2004," said analysts at Goldman Sachs.
"We believe that demand will continue to remain under pressure in the next few months," they said in a research note.
Oil prices had fallen on Friday after figures showed the US economy had grown at a tepid 0.6 percent in the fourth quarter last year.
Jason Feer, vice-president and general manager of energy market analysts Argus, said that because of an economic downturn in the United States, uncertainty clouds the demand outlook for oil over the next couple of months.
"The inventories overhang combined with softening demand is the reason for significant drops in pricing," he said in Singapore on Monday.
Elsewhere, fighters of hardline Shiite cleric Moqtada al-Sadr on Monday were off Iraqi streets after days of fierce clashes with security forces, which had seen an attack on a key Iraqi oil pipeline last week, prompting a price spike.
New York crude hit a record intraday high of 111.80 dollars earlier this month when the markets were focused on possible disruptions to supply and players were putting money into the commodities markets as the dollar fell.
