Oil rises toward $80

Oil prices rose toward $80 a barrel on Friday as French refinery strikes and tensions about Iran's nuclear program outweighed fears that US monetary tightening could slow demand growth in the world's largest oil consumer. The Federal Reserve on Friday poured cold water on speculation that a surprise hike to its emergency lending rate on Thursday signalled a change in monetary policy.
Oil prices initially had fallen after the Fed raised its discount rate by a quarter percentage point to 0.75 percent. On Friday, US crude for March delivery rose 66 cents to $79.72 a barrel by 1:26 pm EST (1826 GMT), after earlier falling by more than $1 to a low of $77.76 a barrel. In London, ICE Brent crude for April rose 33 cents to $78.11 a barrel.
Support for prices came as workers at Total's French refineries continued their strike action, raising concern about fuel supplies in the coming days. "The Federal Reserve's Dudley is trying to downplay yesterday's discount rate hike, reassuring that it is not the beginning of tighter rate policy," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc in New York.
"Also the French refineries began their shut-downs due to strike." New York Federal Reserve President William Dudley said on Friday US economic growth would likely be modest, keeping price pressures under wraps and enabling the Fed to keep benchmark interest rates ultra-low for an extended period.
Tension about Iran's nuclear program was also a supporting factor. Russia's foreign minister on Friday reportedly said that Moscow was very concerned about Iran's lack of co-operation with the UN nuclear agency.
Oil investors have looked to wider economic data over the past year for signs of economic recovery and a potential rebound in energy demand. Oil prices have firmed gradually from lows of near $30 a barrel in December 2008 to the current range between $70 and $85 a barrel as low lending rates have spurred growth and encouraged investors to pour funds into commodities as a hedge against future inflation.
While the benchmark Federal funds rate was left unchanged at near zero, the decision to increase the rate the Fed charges banks for emergency loans raised concerns earlier that US monetary policy could begin to shift. Last Friday, China's central bank said it would lift bank reserve requirements in an unexpected tightening move that could slow demand in the world's No 2 fuel consumer.