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Oil futures inch higher as European equities stay flat, US markets close for Independence Day

Crude futures were slightly higher today due to stronger demand from bargain hunters, which were taking advantage of the low prices that declined from nearly US$80/barrel to below US$72/barrel last week.

Commodity markets were in decline last week due to mounting concerns that the ongoing economic recovery isn’t as strong as thought and that Chinese economic growth, a key support factor for oil and metal prices, is slowing. These fears were triggered by disappointing updates on US and Chinese manufacturing that were reported last week along with a decline in the index of China’s leading indicators.

The key jobs update released in the US on Friday showed a decline of 125,000 in non-farm payrolls, mostly due to the reduction of 225,000 temporary census jobs, while the private sector was shown to have created just 83,000 jobs. The unemployment rate unexpectedly declined from 9.7% to 9.5% to partly offset the disappointing jobs data.

Equity markets in both the US and Europe crashed last week with the UK’s FTSE 100 shedding more than 4% to fall well below the key 5,000 level, while the Dow Jones Industrial Average plummeted to 9,600.

The markets were broadly flat today as investors stayed on the sidelines amid lack of cues. Crude prices have recently been moving along with global equity markets as investors have been taking clues about the outlook for oil demand from movements in share prices.

August Brent Crude rose to US$71.98/barrel, while US light, sweet crude for August delivery improved to US$72.41/barrel on the New York Mercantile Exchange (NYMEX).

Blue chip oil and gas companies were mixed today. BP (LON:BP) was in the lead, rallying 4%. Fellow supermajor Shell (LON:RDSB) lost less than 1% as did Cairn Energy (LON:CNE). BG Group (LON:BG) posted a small gain, while Tullow Oil (LON:TLW) was unmoved.

Amec (LON:AMEC) added nearly 1%. Another oil and gas engineering firm, Petrofac (LON:PFC), posted a marginal loss.

Midcaps generally did better. Salamander Energy (LON:SMDR) led the pack with a gain of nearly 3%. Premier Oil (LON:PMO) and JKX Oil & Gas (LON:JKX) climbed 2.1% and 1% respectively, while Dragon Oil (LON:DGO), Heritage Oil (LON:HOIL) and Soco International (LON:SIA) posted small gains.

Dana Petroleum (LON:DNX) shed less than 1%, while Melrose Resources (LON:MRS) was flat.

Services companies headed in different directions as Wood Group (LON:WG) posted a small loss, while Wellstream Holdings (LON:WSM) advanced 2.6%.

Iraq operating Irish oil company Petrel Resources (LON:PET) and EU operating Rome-based oil junior Mediterranean Oil & Gas (LON:MOG) lost 9% and 7% respectively.