London: Oil rose towards $58 a barrel on Thursday as a surge in global stock markets raised expectations of economic recovery and of increased demand for oil products.
US light crude for June delivery rose $1.54 cents a barrel to $57.88 by 3:00pm, adding to $2.50 gains on Wednesday when it settled at $56.34, its highest close since 14 November, 2008.
London Brent crude rose $1.54 cents to $57.69.
“I think oil is looking at the whole picture, stocks are doing well and economic signals are starting to look a bit better,” said Rob Montefusco, a trader at Sucden Financial.
However, Montefusco said oil’s rally could be short-lived.
“I think it has managed to break the $55 technical level and it is now jumping further but I don’t see any fundamental reasons for it to go higher.”
Oil has tracked a recovery in the equity markets over the past month, with the US Standard & Poor’s 500 Index up some 36% from March lows and rising nearly 2% on Wednesday after better-than-expected jobs data.
The market is now watching out for the results of the US government stress tests on the ability of banks to weather a deep recession, to be released later today.
Expectations for rising oil demand as summer approaches were fuelled by leaks of the test results that suggested most banks were healthier than earlier thought.
In equity markets, Japan’s Nikkei average surged 4.55% after a three-day holiday in the country. The buying continued in Europe as shares rose ahead of Bank of England and ECB interest rate and policy decisions.
US crude inventories have gained again, but by a lower-than-expected 600,000 barrels against forecasts for a 2.2 million barrels build, while US gasoline stocks fell last week by 200,000 barrels to 212.4 million, the Energy Information Administration said on Wednesday.
A slowdown in US private sector job losses in April, as employers cut 491,000 from the salary rolls versus an expected loss of 650,000, was seen as a signal that the economy may be on its way to recovery, and helped oil higher.
Saudi Arabia, the world’s top oil supplier, said it would not raise supplies for the time being as it attempts to shore up prices.
The kingdom is pumping below 8 million barrels per day (bpd) and is unlikely to increase that production as world supply continues to outpace demand, Saudi Aramco Chief Executive Khalid al-Falih said on Wednesday.