Oil steady above $61, slips on weak US data

Oil steady above $61, slips on weak US data
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First Published: Fri, May 22 2009. 09 05 AM IST
Updated: Fri, May 22 2009. 09 05 AM IST
Singapore: Oil hovered above $61 a barrel on Friday, down from Thursday’s six-month highs, as disappointing jobs and factory data dented hopes that the economy of the United States, the world’s top energy user, was set for a quick rebound.
US data on Thursday signalled that the road to recovery for the economy would be long and bumpy, after a key manufacturing index showed only marginally less weakness and unemployment looked set to hit double-digit levels.
Sentiment was further pummelled by fears that the United States could lose its coveted triple-A credit rating.
US crude for July delivery was up 52 cents at $61.57 a barrel by 8:15am, after falling 1.6% to settle at $61.05 on Thursday. It had hit a six-month high of $62.26 in post-settlement trade the previous day, and is up 9.3% so far this week.
London Brent was up 57 cents at $60.50.
“I think the market has got ahead of itself - we’ve talked about ‘green shoots´ of recovery in the economy, but the reality is that it’s going to take time to get traction,” said Peter McGuire, Managing Director of Commodity Warrants Australia.
“Crude has risen about 85% in the last three months, and it’s not likely to go much further in this economic climate - we’re probably going to see a $55 to $65 range over the next couple of weeks,” he added.
The Philadelphia Fed’s closely watched indicator of factory activity in the Mid-Atlantic region rose by a fraction in May, with contraction more than markets had expected.
The US Labour Department also reported that initial jobless claims last week fell for the third time in four weeks, but continuing claims hit a 16th consecutive record high.
The reports come a day after the Federal Reserve, in minutes released from its April policy meeting, said a full US recovery could take five or six years.
Ratings agency Standard & Poor’s warning that it could cut its top AAA credit rating on the UK also stoked worries that the United States could face a similar fate.
US stocks saw a broad sell-off on Thursday, and the dollar hit a two-month low against the yen on Friday, as investors worried about the US budget deficit, exited dollar-denominated assets.
Oil has been on an upward trend since mid-April in an equity-led rally. Prices have recovered from below $33 in December after a plunge from record highs above $147 in July.
It got another boost on Wednesday after weekly US government inventory data showed a steep drop in crude and gasoline stockpiles ahead of the US Memorial Day weekend, traditionally the start of the summer driving season.
On the supply front, the Organization of Petroleum Exporting Countries (Opec), which has agreed to cut 4.2 million barrels per day of output since September to prop up prices, will meet again on 28 May to decide on supply.
But Opec is likely to keep output targets steady as stronger oil demand in coming months could cut brimming inventories, a senior Gulf Opec delegate told Reuters.
Eleven of 12 oil analysts and economists surveyed by Reuters also saw Opec maintaining its output target.
Unrest in Opec member Nigeria, Africa’s top oil and gas exporter, could provide some price support.
Nigeria last week launched its biggest military offensive for years in the western Niger Delta, bombarding militant camps and using troops to flush rebel fighters out of local communities.
But minister of State for Petroleum Odein Ajumogobia told Reuters the country’ oil output was still broadly unchanged around 1.6 million barrels per day (bpd).
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First Published: Fri, May 22 2009. 09 05 AM IST
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