Oil above $42 on bargain-hunting

Oil above $42 on bargain-hunting
Comment E-mail Print Share
First Published: Fri, Jan 09 2009. 08 50 AM IST
Updated: Fri, Jan 09 2009. 08 50 AM IST
Singapore: Oil rebounded above $42 on Friday on light bargain-hunting, after sinking 2% overnight on deepening economic gloom in the United States, which signalled weakening demand from the world’s top energy consumer. The market will scrutinise the Labour Department’s December non-farm payroll and unemployment data due later on Friday, which will likely be dismal, for further clues on future demand.
US crude for February delivery was up 72 cents at $42.42 a barrel by 7:50am, after sinking 2.2% to settle at $41.70 overnight. The decline followed Wednesday’s 12% drop, the biggest daily percentage decline in the price of crude oil in more than seven years.
London Brent crude was up 63 cents at $45.30.
“At the $40-$42 level, oil is seen as undervalued, so people are now buying back,” said Tetsu Emori, a fund manager with Astmax Co Ltd in Tokyo.
Overnight, weaker-than-expected sales from retail giant Wal-Mart and a surge in weekly US jobless benefit rolls to a 26-year high reignited fears of flagging demand, offsetting earlier support from escalating tensions in the Middle East and widening supply disruptions from the Russia-Ukraine gas row.
US jobs data due at 7pm, on Friday is likely to show the economy probably lost more than half a million workers last month, pushing the unemployment rate up to a 15-year high of 7.0%.
Economists polled by Reuters expect non-farm payrolls to register a drop of 550,000 jobs for December, which would make it the worst single month of job losses in 34 years.
Oil has fallen more than $100 from a record peak of over $147 a barrel in July, as the global economic downturn hits demand for fuel. It settled at $33.87 a barrel on 19 December, the lowest level since 10 February, 2004.
President-elect Barack Obama, who takes office on 20 January, has urged US lawmakers to work day and night to pass a massive proposed stimulus package of tax cuts and public-works spending likely to cost $800 billion or more.
Also underpinning oil prices is mounting evidence that Opec members are implementing the group’s biggest-ever output cuts. Earlier this week, Kuwait and Iran told customers of bigger supply curbs this month in a bid to prop up prices.
The producer cartel has cut output three times since September, in a bid to halt the market’s slide.
Meanwhile, Russia has agreed on the deployment of monitors to oversee gas supplies to the European Union via Ukraine, clearing the way for the resumption of gas supplies, the Czech EU presidency said in a statement on Thursday.
The UN Security Council passed a resolution on Thursday calling for an immediate ceasefire in Gaza and Israel’s full withdrawal after a 13-day offensive. but the United States abstained in the vote.
The vote followed days of intense haggling at the U.N., with foreign ministers from Arab nations pressing France, Britain and the United States to go along with a resolution rather than a more diluted president’s statement.
While the conflict does not directly threaten any oil supplies, Middle East unrest can bolster prices because countries in the region pump about a third of the world’s oil.
Comment E-mail Print Share
First Published: Fri, Jan 09 2009. 08 50 AM IST
More Topics: Markets | Oil | Crude | US | Jobs |