Oil up on worries over US mortgage market crisis

SINGAPORE (AFP) - Oil prices were higher in Asian trade amid lingering worries that the US subprime mortgage crisis will eventually hurt US economic growth, dealers said.

At 9:50 am (0150 GMT), New York's main contract, light sweet crude for September delivery rose 18 cents to 71.65 US dollars a barrel from 71.47 dollars in late US trades Friday.

Brent North Sea crude for September delivery was four cents up at 70.43 dollars.

"That is still hanging over the market," Tobin Gorey, a commodity strategist with the Commonwealth Bank of Australia in Sydney, said of the troubled US subprime mortgage market.

"This worry won't go away quickly and could hang over the oil market."

Concerns about the multi-trillion housing and mortgage markets have swept the globe, sparking big falls on Asian and European stock markets that in turn prompted the Federal Reserve and other central banks to inject funds into the system.

Japan's central bank pumped more funds into the banking system, announcing Monday it will inject 600 billion yen (5.0 billion dollars) to avert liquidity shortages.

The Bank of Japan had already pumped one trillion yen into the money market on Friday as part of the concerted global action to ward off a credit crunch.

The US Federal Reserve had pumped a further 38 billion dollars into the US banking system.

Analysts fear the crisis in the US subprime mortgage market could ignite a slowdown in the world's biggest economy which will affect energy demand and economic growth in the rest of the world.

Traders are now worried "how much impact does this have on US growth," said Gorey. "Also, if the US is slower, who else slows along with it."

Meanwhile, the International Energy Agency on Friday called on Organisation of the Petroleum Exporting Countries (OPEC) to increase oil production to cope with an expected surge in winter demand in the northern hemisphere.

The IEA said in its monthly report that the main oil producers would have to release an extra 2.5 million barrels a day in the final quarter to keep up with higher-than-expected global demand.