NEW YORK (AFP) — Oil prices climbed Monday in volatile trade as traders weighed concerns about global demand and a stronger-than-expected US manufacturing report.
New York's main oil futures contract, light sweet crude for July delivery, rose 41 cents to close at 127.76 dollars a barrel.
In London, Brent North Sea crude for July climbed 24 cents to settle at 128.02 dollars.
Prices rebounded after the publication of the Institute for Supply Management (ISM) index of manufacturing activity, which rose to 49.6 in May, topping market expectations of a fall to 48.0 from 48.6 in April.
Although the reading still indicated reduced activity for the fourth straight month, it rose close to 50, above which readings indicate growth.
Crude oil has shed about eight dollars since striking record peaks of 135.14 dollars in London and 135.09 dollars in New York on May 22.
"Last week, crude futures suffered from a fresh wave of profit taking," Kryuchenkov said.
"The sell-off was also (driven) by concerns that demand for energy is weakening due to record oil prices, with a wave of fuel strikes across the globe highlighting these fears."
New York crude plunged five dollars last week, while London Brent shed about four dollars, falling in line with a recovering US currency that makes oil more expensive for foreign buyers and therefore dampens demand.
"The signs that demand is falling is forcing funds to seek better profits elsewhere," Alaron trader Phil Flynn said Monday.
"Keep an eye on the 125 dollars a barrel area. A close below (that level) could open up the selling floodgates."
Despite the recent easing prices, the high cost of crude has sparked widespread international alarm and US-led calls for the Organization of the Petroleum Exporting Countries to produce more oil.
However, OPEC president Chakib Khelil on Saturday reiterated the cartel's long-standing view that speculators and the weak dollar were partly to blame for runaway prices.
"The consensus is that the crisis is not over and there is going to be a continuing impact on the prices of oil because of speculation," he said.
Khelil, also Algeria's energy minister, said OPEC would not review the situation again until it meets in Vienna on September 9.
OPEC, which pumps 40 percent of the world's oil, is reluctant to bend to demands that it produce more to dampen the red-hot market.
Meanwhile on Monday, US Treasury Secretary Henry Paulson, on a tour of the Gulf region, said foreign investment in oil-producing countries would help the supply picture.
"On the supply side, we are urging all oil-producing countries to open oil markets to foreign investment, which would support faster and more efficient growth," he said in a speech in the oil-rich United Arab Emirates.
And he said the Gulf region alone could not alleviate the market pressures.
"High oil prices are the result of supply and demand factors that are likely to persist for some time ... speculation and the depreciation of the dollar are likely only small factors behind oil price increases."
Paulson was in the UAE capital Abu Dhabi on the third and last stop of a Gulf tour.
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