Singapore: Oil prices rebounded in Asian trade Friday, 17 August, following a dramatic turnaround in US stocks amid a global equities turmoil whipped-up by a crisis in the US subprime credit market, dealers said.
Investors are closely watching how the default problems in low-quality US housing loans will affect the US and other global economies and how this would impact on oil demand, they said.
At 10:40am (0240 GMT), New York’s main contract, light sweet crude for September delivery, was up 59 cents to $71.59 a barrel from $71 in late US trades Thursday.
Brent North Sea crude for September delivery advanced 21 cents to $69.98.
The New York contract had dropped $2.33, while Brent had fallen $2.22 overnight.
“I think the price rise is consistent with the movement in the equities markets,” said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Getz.
US stocks mounted a dramatic recovery to pare back steep losses Thursday, with the Dow Jones Industrial Average closing down a slight 0.12% at 12,845.78 after earlier sliding over 320 points below 12,600.
The tech-rich Nasdaq finished down 0.32%, while the broad-market Standard & Poor’s 500 index gained 0.32%.
Some Asian stock markets opened higher or narrowed down declines on Friday.
Shum said the recent drop in oil prices was due to hedge funds pulling out to look for less risky investments, adding that much would depend on how global economies will be affected by the US-induced credit squeeze.
“It depends on how serious the US housing market problems are and how the credit tightness problems are,” he said.
“It’s too early to tell how serious the US problems are... but the economic data outside of the housing market says the state of the economy is healthy.
“So far, the global economy also remains quite healthy, and so we have to wait and see how serious the US problem is.”
If the impact of the US credit woes is limited, hedge funds are expected to return to the oil markets.
“The fundamentals in the oil market remain supportive of strong prices,” Shum said.
The Organisation of Petroleum Exporting Countries (Opec) is expected to keep production at current levels during its meeting next month in Vienna, Shum added.