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Oil under $50 after 2% surge on economic hopes

Oil under $50 after 2% surge on economic hopes
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First Published: Thu, Apr 16 2009. 10 48 AM IST
Updated: Thu, Apr 16 2009. 10 48 AM IST
Singapore: Oil fell back below $50 a barrel on Thursday, after surging more than 2% as equity markets rallied on signs the US recession was easing, boosting hopes of a demand recovery in world’s top energy consumer.
The market will be eyeing US weekly jobless claims, due later in the day, for further signs that the speed of contraction in the economy was abating.
Guardedly positive comments on the US economy from the Federal Reserve’s Beige Book report outweighed bearish government data showing that US crude inventories last week rose to the highest level in nearly 19 years, sparking a rally on Wall Street overnight and Asian shares on Thursday.
But oil pared some gains after China released mixed economic data. The world’s second-largest energy consumer said its economy grew a slower-than-expected 6.1% in the first quarter, but posted other data, such as industrial output, that signalled some optimism.
By 9:36am, US crude for May delivery was up 63 cents to $49.88 a barrel, after rising to $50.30 earlier. ICE Brent crude for the new front-month of June was up 53 cents at $52.97 a barrel.
“The US inventory stats were really, really bad and we expected oil to fall to around $43 to $48, but the bottom was pretty firm even with the terrible data, and it’s trading around plus or minus $50,” said Tony Nunan, risk manager at Tokyo-based Mitsubishi Corp.
“It looks like the market has found its bottom, but it’s going to struggle to go up from here.”
Mixed economy outlook
The Energy Information Administration’s (EIA) weekly inventory report showed a 5.6 million-barrel rise in US crude stocks, to 366.7 million barrels -- the highest since September 1990 -- beating analysts’ expectations of a 1.9 million-barrel build.
The Fed’s Beige Book showed that the US economy continued to weaken in March and early April, but the pace of decline was easing amid scattered signs the country’s recession may be nearing an end.
Wall Street stocks took heart from the report’s cautiously reassuring tone, which broke a string of depressing news from the closely watched Beige Book, and the Dow Jones industrial average closed 1.38 percent higher after a choppy session.
After an early lift from Wall Street, Asian stocks pulled back from a six-month high on Thursday, after China posted its slowest-ever quarterly growth.
US jobless claims, due today, are forecast to hit a total of 655,000 new filings, versus 654,000 in the prior week, a Reuters poll of economists showed.
Crude prices have tumbled nearly $100 per barrel since last July, as the global recession dented oil demand, but they have recovered in recent months from a low of $32.40 in December.
The Organization of the Petroleum Exporting Countries or Opec said on Wednesday that world oil demand would fall by 1.37 million barrels per day (bpd) in 2009, revised from its previous forecast for a fall of 1.01 million bpd.
Both the International Energy Agency (IEA) and US government agency EIA have also just reduced their global demand forecasts.
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First Published: Thu, Apr 16 2009. 10 48 AM IST
More Topics: Markets | Oil | Crude | US | Data |