Oil climbed alongside Asian equities after established home sales jumped more than forecast in July to the highest in almost two years, signaling the housing crisis that crippled the world’s largest economy may be easing. The dollar was little changed after falling for a fourth day against the euro Aug. 21, bolstering the appeal of commodities.

“A lot of the gains in commodities have been based on what I’d call ‘loose fundamentals’ — driven heavily by what’s happening in equity markets rather than supply-demand issues,”

Sunday, Apr 19, 2009,

Benchmark crude for May delivery added US$0.35 to settle at US$50.33 a barrel on the New York Mercantile Exchange on Friday.

With the May contract ending next week, traders focused on crude stocks with a later delivery under the June contract.

Crude for June delivery increased US$0.31 to settle at US$52.47 a barrel.

In London, Brent prices gained US$0.29 to settle at US$53.35 a barrel on the ICE Futures exchange.

“There’s still a lot of money out there that has to go somewhere,” said Michael Lynch, president of Strategic Energy Economic Research.

“They see it as a good buy long-term,” Lynch said.

Investors see oil stocks as the ultimate safe haven, a commodity that will almost certainly be in greater demand next year. That is what has kept prices aloft this week despite daily reports showing the world economy is running on less oil, not more.

The government said this week that US storage facilities were bloated with the biggest surplus in nearly 19 years.

If that wasn’t enough, the US government, OPEC and the International Energy Agency all revised their demand forecasts, saying the world would consume even less petroleum this year than expected.

A few months ago, such news probably would have pushed crude prices to new lows.

But traders said they have already factored in the tepid global economy and have moved on. They are guided now by rising equities markets and a general hope that better times are ahead.

“Crude’s really moving in sympathy with the stock market right now,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

Analyst Phil Flynn also noted reports that China is pumping money into raw materials like oil to shield itself from depending too heavily on the US dollar.

He said in a research note that the move by China has persuaded other investors to snap up oil stocks as well.

“There is growing evidence that China will look to store oil and other commodities as opposed to US treasuries,” Flynn said.
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1 day ago

NEW YORK (AFP) — Oil prices dropped more than a dollar on Monday as traders tracked fresh falls on global stock markets.

New York’s main contract, light sweet crude for May delivery, tumbled 1.46 dollars from Friday’s closing price to end at 51.05 dollars per barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for delivery in May dived 1.23 dollars to 52.24 dollars a barrel, after earlier shooting as high as 54.31.

“We?re seeing a bit of a correction after the stock market took a hit today,” said Bart Melek of BMO Capital Markets. “We?re falling towards 50 dollars after a pretty considerable rally in the last few weeks and a fairly optimistic equity market.”

Melek said he sensed some profit taking, in reaction to the fall in US and European equity markets.

Shares fell as US investors turned cautious ahead of first-quarter earnings news and European sentiment suffered from disappointing retail sales results.

“Traders are certainly realizing that we are not out of the woods on the demand side, and that perhaps the optimism that was shown over the last few days was a little bit premature,” Melek said.

Global equities had marched higher early Monday as sentiment was boosted by pre-weekend gains on Wall Street and record demand for HSBC bank’s historic rights issue, dealers said.

But European stocks turned south after Wall Street sank on concerns ahead of the US quarterly earnings season starting this week and amid reports that IBM’s takeover deal for Sun Microsystems may be shelved.

London Brent oil had breached 54 dollars in earlier trade on optimism that a global economic recovery could spur energy demand, analysts said.

Crude oil had won support “on speculation that the global economic stimulus efforts and production cuts by OPEC may slow growth in world stockpiles of the fuel,” said BetOnMarkets analyst Dave Evans.

Markets had also shrugged off North Korea’s launch on Sunday of a long-range rocket, which passed over northern Japan without incident, they said.

Oil prices had risen sharply after the Group of 20 London summit Thursday stoked hopes of an economic upturn and rising demand for raw materials.

But markets were overshadowed somewhat on Friday by news that the US unemployment rate jumped to a fresh 25-year high of 8.5 percent in March as recession-battered employers shed another 663,000 jobs.

A spreading worldwide recession has ravaged energy demand and slashed oil prices from their record peaks of above 147 dollars last July.

The Organization of the Petroleum Exporting Countries (OPEC), which pumps 40 percent of world oil, had opted last month to leave production quotas unchanged because of the global economic slowdown.

Late last year, the 12-nation cartel had slashed its output by a total of 4.2 million barrels a day as it sought to halt the slide in oil prices.

Oil prices rose above $53 a barrel Thursday as encouraging U.S. data on durable goods orders and home sales spurred hopes for a recovery in crude demand.

Benchmark crude for May delivery was up 85 cents to $53.62 a barrel by mid-afternoon in Europe in electronic trading on the New York Mercantile Exchange.

In London, Brent prices rose $1.22 to $52.97 a barrel on the ICE Futures exchange.

Gains in global stock markets also supported oil prices, and the uptick in sentiment appeared to be enough to temper concerns over sharply accumulating inventories in the U.S., although analysts warned this may not last.

“Without the continued support of equities, crude oil should have more difficulties to move above the $55-a-barrel mark as the fundamentals are not yet providing enough evidence of a tightening market,” said Olivier Jakob of Petromatrix in Switzerland.

Oil prices fell Wednesday — the contract lost $1.21 to settle at $52.77 a barrel — on news that crude in storage last week rose 3.3 million barrels to 356.6 million barrels, according to the Energy Information Administration Wednesday, much more than what was expected. The figure marks a 15.6 percent rise from year-ago levels, and stockpiles are now at their highest level since 1993.

But traders seemed to shake that off amid hopeful signs in the United States, the world’s biggest oil consumer.

Durable goods orders increased a better-than-expected 3.4 percent last month, the first advance since July and the strongest one-month gain in 14 months, the Commerce Department said. New home sales also rebounded, rising 4.7 percent to a seasonally adjusted annual rate of 337,000.

“We could see today the rally go slightly higher from here on yesterday’s figures,” said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. “You have a little modest rally in Asia on the back of that, and that’s sort of helping crude a bit.”

Most Asian markets gained after a late rally on Wall Street Wednesday that lifted the Dow Jones industrials 1.2 percent, while European markets were little changed.

But Moltke-Leth warned against reading too much into Thursday’s bump. He predicted that prices will be capped around $55 and could fall as low as $43 a barrel over the next two weeks as other big countries release key economic indicators that could very likely be grim.

“Traders are so desperate that they are now buying, not on fundamentals, but rather on fear of missing out before this market heads back into the toilet,” said The Schork Report, edited by U.S. oil analyst and trader Stephen Schork.

Japan, which said exports plunged by nearly half in February, will release a quarterly business sentiment survey called the “tankan” next Wednesday that experts say is likely to be quite gloomy.

Just six months ago, the question was how high crude could reach. Now, it’s how low can it go?

Oil prices have fallen more than $100 a barrel amid a global recession that has sapped consumption. And economists say the sting will likely last longer than any other recession since World War II.

Now, $40 crude — seemingly unthinkable during its dizzying race into triple digits in the first half of this year — is within reach.

Today, light, sweet crude for January delivery settled at $40.81 a barrel on the New York Mercantile Exchange, down by nearly $3 per barrel. Prices fell as low at $40.50, levels last seen in December 2004.

IHS Global Insight chief economist Nigel Gault said Thursday inflation has vanished alongside oil’s plunge. He said crude could hit a trough of $39 a barrel in the second quarter of next year, increasing the threat of deflation — falling prices in tandem with reduced output and higher unemployment.

Tom Kloza, chief oil analyst with the Oil Price Information Service in Wall, N.J., called $40 the new $10, meaning $40 is the bottom now as $10 was the bottom in the last two oil crashes in the mid-1980s and the late 1990s.

But Merrill Lynch’s global economic team said in a report Thursday prices could temporarily fall as low as $25 a barrel if the recession spreads to China and the Organization of the Petroleum Exporting Countries doesn’t cut enough production at its Dec. 17 meeting.