Oil rises above $77 as Gulf moratorium effect sets in, China energy consumption tops US

Oil rises above $77 as stocks come off lows

NEW YORK — Oil prices rose from early lows on Tuesday as the stock market gained back some ground following disappointing earnings reports from Goldman Sachs and IBM.

Gas pump prices fell a little, with the national average for a gallon of unleaded regular at $2.719, according to AAA, Wright Express and Oil Price Information Service. That’s 0.3 cent lower than Monday’s average, 0.6 cent higher than a week ago and 25.4 cents above the price a year ago.

Benchmark crude for August delivery rose 57 cents to $77.11 a barrel on the New York Mercantile Exchange. The contract rose 53 cents to settle at $76.54 on Monday. Tuesday is the last trading day for the August contract and most interest has shifted to the September contract, which added 57 cents at $77.47.

“Oil markets are still dominated by woes about the state of the economy, while oil fundamentals come second,” JBC Energy said in a report. “To reduce the substantial slack in oil markets, a marked improvement in oil demand is required.”

Investors have looked to stocks as indicators of where the economy and demand might be headed. The Dow Jones Industrial Average was down 72 points in midday trading after dropping almost 150 points in early trading. The NASDAQ and the S&P 500 were off too. Second-quarter revenue for Goldman Sachs and IBM came in lower than expected and pulled down stock prices.

“Traders seem to have taken their cue from equities,” said energy consultancy Cameron Hanover.

Although oil has hovered around $76 or $77 a barrel for the last two weeks amid light summer trading, analyst Stephen Schork says a government moratorium on deepwater drilling in the Gulf of Mexico could mean prices will start to rise.

“The market is thus growing concerned regarding the future availability of oil and that is clearly bullish,” SChork said in a note to investors.

Traders are also keeping a close watch on China, which will likely account for more than half of global crude demand growth this year. A new report from the International Energy Agency said China has moved ahead of the U.S. as the world’s largest energy consumer. IEA, based in Paris, said China’s 2009 consumption of everything from oil and coal to wind and solar power equaled 2.265 billion tons of oil,

“China is unquestionably the most important influencing factor,” JBC Energy said. “Strong Chinese demand growth has been a stable element in the oil market and even the worst global recession in 70 years did not manage to slow down consumption.”

In other Nymex trading in August contracts, heating oil rose 1.05 cents to $2.0275 a gallon, gasoline gained 1.71 cents at $2.0761 a gallon and natural gas added 3 cents at $4.540 per 1,000 cubic feet.

Brent crude was up 47 cents at $76.09 a barrel on the ICE futures exchange.

Associated Press writers Barry Hatton in London and Alex Kennedy in Singapore contributed to this report.