London: US oil prices rallied more than $3 per barrel to above $78 on Monday after policymakers agreed a rescue package worth around $1 trillion to stabilize world financial markets and resolve the Greek debt crisis.
The size of the package surprised dealers and boosted confidence that oil demand will recover this year.
The package consists of €440 billion in guarantees from euro area states, plus €60 billion in a European stabilization fund that could be disbursed to help euro zone states if needed. A further €250 billion would come from the International Monetary Fund (IMF).
Global equities and the euro rebounded and the dollar index slipped as news of the rescue package helped calm risk aversion.
Benchmark US light crude oil futures for June delivery were up $3.06 at $78.17 a barrel by 0853 GMT. ICE Brent crude for June also jumped $3.17 to $81.44.
Opec Secretary-General Abdullah al-Badri said he expected the emergency package to boost oil prices back up above $80 a barrel, but warned of wild price swings as the global economy continued on its path to recovery.
“I think the market will look positively at this development,” Badri told reporters on the sidelines of the Arab Energy Conference. “I assume prices would go back to normal, where it was ... back up to $80 plus.”
Ben Westmore, a commodities analyst at National Australia Bank, said it would take some time for events in Europe to play out and uncertainty would remain in investors’ minds.
“But the announcement of these packages allays some concerns because contagion can be contained in the short term,” he added.
Edward Meir, analyst at brokers MF Global, agreed:
“We expect that this will be enough to calm the frazzled markets for now,” Meir said.
Crude prices fell more than $11 last week, the biggest weekly loss in almost a year and a half, on worries the euro zone’s debt crisis would derail the global economic recovery.
Badri said on Sunday global oil markets were oversupplied, but it was too early to talk about the producer group taking action to halt the sharp price fall sparked by the euro zone debt crisis.
“Opec is overproducing, there is no doubt about it,” he told reporters in Doha, urging greater compliance from Opec producers with deep curbs in production agreed in 2008.
Price charts show US crude temporarily supported at $74.51 and expected to rebound to $78 as the drop last week was too sharp not to be followed by a powerful rebound.
Saudi Arabia, the world’s top crude oil exporter, will maintain full volumes to its main Asian customers and keep supplies steady to at least one European major next month, suggesting it is content with oil prices.
China imported 21.17 million tonnes of crude oil or 5.15 million barrels per day in April, a record high level on a daily basis, according to data released by the customs department. The import level was 31% higher than a year earlier, when imports were at 16.17 million tonnes.