Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Money / Oil gains towards $86 on demand optimism
BackBack

Oil gains towards $86 on demand optimism

Oil gains towards $86 on demand optimism

Premium

Singapore: Oil rebounded towards $86 on Friday after two days of declines, as positive US economic indicators and views that China may revalue its currency bolstered expectations for sustained energy demand growth.

US equities reversed early losses to finish higher on Thursday as strength in retail sales boosted optimism about the economy and consumer demand.

The Chinese yuan and other Asian currencies rose briskly on Thursday as speculation intensified that China might soon revalue its currency and unveil a long-awaited shift in its exchange-rate regime.

“Oil is a dollar-denominated commodity, so if the dollar gets weaker against the yuan, it will be cheaper for China to buy oil," said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore. “In the short term, it could be bullish."

Front-month US crude advanced 39 cents to $85.78 a barrel by 8:52am, having touched an 18-month high of $87.09 earlier this week. ICE Brent climbed 43 cents to $85.24.

“The range is pretty tight," Chu said. “People are not really jumping at the market at $87, but at the same time $85 support still holds. Technically speaking, the next resistance level would be $90, but I don’t think the market will really rally above that level in terms of fundamentals."

US oil consumption is gradually recovering from a year and a half of declines. Over the past four weeks, total product demand rose 1.9% from a year earlier, the Energy Information Administration said on Wednesday.

But US crude inventories reached their highest level in almost ten months after rising for ten consecutive weeks last week, an indication that supply is still outpacing demand.

“If you look at the fundamentals, the market should pull back," Chu said. “We lost so many jobs during the recession that it takes a while for demand to really pick up."

The number of US workers seeking jobless aid unexpectedly shot up last week. However, that did not alter the view that labor markets are recovering as the increase reflected Easter holiday volatility.

Beijing has pegged the yuan near 6.83 per dollar since mid-2008 to help its exporters weather the global crisis. But this has drawn increasing complaints from Washington that the yuan is seriously undervalued, handing Chinese firms an unfair trading advantage and effectively exporting unemployment.

The New York Times reported on Thursday that Beijing was very close to announcing a “small but immediate" revaluation and would then let the yuan fluctuate more widely.

“China is trying to boost domestic consumption, and domestic consumption is growing," Chu said. “But China is still an export-oriented country. In the longer-term, a revaluation could be a bearish thing for oil."

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 09 Apr 2010, 09:02 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App