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Oil rises above $67 on renewed economic recovery hopes

Oil rises above $67 on renewed economic recovery hopes
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First Published: Fri, Jul 31 2009. 09 27 AM IST
Updated: Fri, Jul 31 2009. 09 27 AM IST
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* Oil extends 5.7 pct rise above $67 on bullish jobless data
* But oil still headed for first monthly fall since January
* Japan’s Nikkei hits 10-month high;markets eyes Q2 U.S. GDP
Singapore: Oil extended gains above $67 a barrel on Friday, after a 5.7% jump in the previous session on US data and earnings which renewed hopes of an economic recovery and drove up equity and commodities markets.
But the latest jump merely erased Wednesday’s hefty losses on rising US crude inventories and falling refinery utilisation, with oil heading for its first monthly percentage fall since January of around 4%.
US light crude for September delivery rose 26 cents to $67.20 a barrel by 0304 GMT, having settled up $3.59, or 5.67% at $66.94, its biggest one-day gain since 9 April.
London Brent crude gained 20 cents to $70.31.
“Short-term fundamentals are weak but prices are moving up on expectations of an economic recovery. The market is driven by the medium and longer-term outlook,” said Tony Nunan, risk manager at Tokyo-based Mitsubishi Corp.
Markets rose on Thursday on government data showing the number of US workers staying on jobless rolls fell to the lowest in three months last week, while the four-week moving average for new claims dropped by 8,250 to 559,000 — the lowest level since late January.
Support also came from data showing euro zone economic sentiment increased in July to its highest level in eight months, helping to lift European equities to their highest close in nearly nine months.
Asian stocks markets extended gains on Friday, with Japan’s Nikkei average rising 1.4% to hit a 10-month high while stocks outside of Japan were up 1.15%.
Thursday’s 5.7% jump came on the heels of Wednesday’s 5.8% loss stemming from a 5.1 million barrels build in US crude inventories and a 1.2% point fall in refinery utilisation, and traders said volatility would remain high.
“We continue to anticipate an unusually tough trading environment in which price follow-through in either direction is unlikely to be sustained by more than 10% or much more than 1 or 2 weeks,” said Jim Ritterbusch, president of US energy adviser Ritterbusch and Associates.
Historical volatility rose to its highest level since May this week but implied volatility is more subdued at around 45%, well off early-July peaks. This suggests the options market is feeling more at ease with oil’s recent $60-$70 range, even though the swings within it are more pronounced.
The market will be keeping its eyes trained on advance US second-quarter GDP figures, to be released at 1230 GMT, for further signs of an economic recovery.
US President Barack Obama braced the country for more bad economic news on Thursday, saying the figures would show the economy contracted and job losses were still a “huge” problem.
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First Published: Fri, Jul 31 2009. 09 27 AM IST
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