Oil holds above $90 on stock market gains

Oil holds above $90 on stock market gains

Singapore: Oil held above $90 a barrel on Friday, after the previous day’s 3% rebound from six-week lows, as stock markets bounced on a plan by US President George W. Bush to bail out troubled homeowners.

Asian shares hit four-week highs, while oil gained on easing concerns that a recession in the US would cut into oil demand in the world’s biggest energy consumer.

“The plan helps bolster sentiment across the commodities markets," said Gerard Burg, an analyst with National Australia Bank based in Sydney.

US crude futures rose 12 cents to $90.35 a barrel by 0400 GMT, having jumped $2.74 in New York on Thursday. London Brent edged up 8 cents to $90.26, after settling $1.69 higher at $90.18.

The rebound stemmed a sharp sell-off since the peak near $100 a barrel late last month that has been propelled by growing uncertainty over the health of the US economy.

President Bush on Thursday outlined a plan that would freeze interest-rate increases on adjustable-rate subprime mortgages for five years, aimed at preventing a crash in house prices that could drive the US economy into recession.

Fears of US economic weakness had been a factor cited by Opec when it decided at its meeting on Wednesday to keep production levels unchanged.

“It is also probable that the increase in oil prices reflected a delayed adjustment to the previous day’s news that Opec had decided to leave oil production unchanged and that US crude oil inventories had fallen heavily," said David Moore, commodity strategist at Commonwealth Bank of Australia.

Falling US inventories have been one factor pushing oil prices up 40% from August to late November.

Government data on Wednesday showed an 8 million barrel drop in US crude stockpiles last week to their lowest level in more than two years.

But the market focused on rising product stocks, with distillates including heating oil up by 1.4 million barrels, and gasoline inventories rising 4 million barrels.

Lower heating fuel inventories in Northwest Europe versus year-ago levels kept prices supported.

Stocks of gas oil for heating fell to 1.224 million tonnes in independent storage in the Amsterdam-Rotterdam-Antwerp area, 25% lower than a year earlier.