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Oil prices up in Asian trade

business Updated: May 07, 2009 08:42 IST

Oil prices rose to five-month highs in Asian trade on Thursday after figures showed US crude reserves increasing at a lower-than-expected rate, analysts said.

New York's main futures contract, light sweet crude for delivery in June, gained six cents to 56.40 dollars a barrel.

Brent North Sea crude for June delivery was up 27 cents to 56.42 dollars.

The US Department of Energy's weekly inventory report on Wednesday showed a 600,000-barrel increase in crude stockpiles for the week ended May 1, far less than the two-million-barrel build-up, analysts expected.

The lower-than-expected increase was a sign of resurgent "oil demand optimism," said Phil Flynn of Alaron Trading.

"The reason why oil is rising is because of hopes that the economy can recover at a time when OPEC (the Organisation of the Petroleum Exporting Countries) is cutting back on production," he added.

Crude futures on Tuesday began hitting multi-month highs on hopes of a recovery in energy demand, alongside rising stock markets.

However, Mitsubishi Corp's risk manager Tony Nunan warned that pre-existing problems in the oil market remained unresolved, and might pose a challenge to existing prices.

"Overall, the fundamental picture still doesn't look good. The total inventory picture is still very high," said Nunan, who is based in Tokyo.