Perth: Oil paused from its decline and steadied around $40 a barrel on Monday, as hopes that the United States would act swiftly to approve a economic stimulus package this week outweighed demand concerns.
Tough talk from the Organization of Petroleum Exporting Countries (Opec) that it would cut output again if needed at its March meeting, violence in Nigeria and renewed tensions between Iran and the West also lent support.
US crude for March delivery edged down 5 cents to $40.02 a barrel in Globex electronic trading by 4:50am. The contract fell $1 to settle at $40.17 a barrel. London Brent rose 12 cents to $46.33.
“Hopes of the US stimulus package being approved this week are giving some underlying support. The market is adopting more of a wait-and-see approach now partly because the jobs data on Friday has dampened sentiment,” said Mark Pervan, commodities analyst at Australia & New Zealand Bank.
Top aides to President Barack Obama on Sunday urged Democratic and Republican lawmakers to set aside political differences and quickly approve a massive economic stimulus package this week, as the world’s largest economy suffers from the worst financial crisis in 70 years.
Oil’s fall on Friday was triggered by news of steep job cuts in the United States, where nearly 600,000 jobs were slashed last month, the most severe cut since December 1974, prompting worries of still weaker demand in the world’s biggest oil consumer.
The financial malaise, which first sprung from housing mortgage defaults in the United States, has swiftly spread to Europe and Asia, throwing a string of industrialised nations into recession.
The economic slowdown has shaved energy demand around the world, causing prices to plummet more than $100 from a peak of near $150 struck last July.
Opec will take whatever action is necessary to balance the oil market when it next meets on 15 March, the group’s president said in a statement on Friday.
Opec sources have indicated the group could cut a further 1 million bpd from output when it next meets, adding to the 4.2 million bpd in cuts announced since September.
Renewed violence in Nigeria also helped buoy oil prices. Nigerian militants attacked a gas plant operated by Royal Dutch Shell in the Niger Delta on Saturday and warned of more attacks to come, but the army said it had repelled the raid and killed three gunmen.
On the geopolitical front, Western powers said on Saturday Iran risked isolation and more sanctions if it did not comply with demands to rein in its nuclear programme, but Washington also reaffirmed its offer for talk with Tehran.