- The Washington Times - Thursday, April 2, 2009

Oil prices jumped to above $51 a barrel Thursday as stock markets soared in Asia and Europe and investors saw glimmers of hope that the U.S. economy may be stabilizing.

Investor sentiment was also boosted by reports that the Group of 20 summit of world leaders in London has agreed to increase funding for the International Monetary Fund and will tighten regulation of financial markets.

Benchmark crude for May delivery was up $2.68 to $51.07 a barrel by mid-afternoon in Europe in electronic trading on the New York Mercantile Exchange. The contract fell $1.27 on Wednesday to settle at $48.39.

In London, Brent prices rose $3.01 to $51.45 a barrel on the ICE Futures exchange.

A smaller-than-hoped interest rate cut by the European Central Bank _ only 25 basis points against expectations of a half-percentage-point cut _ as well as surprisingly high unemployment figures in the United States took some wind out of the markets’ sails and prices retreated slightly.

The Nymex contract reached a peak of $51.53 before falling back, while Brent traded as high as $51.85 earlier in the session.

Oil prices have pulled back from 3-month highs of above $54 a barrel last month as investor optimism that the global recession may be bottoming waned. Still, some investors have taken heart from improving U.S. housing data that the worst could be over.

Pending home sales rebounded in February from a record low, the National Association of Realtors reported Wednesday, while the Institute for Supply Management’s index of manufacturing activity contracted in March but by a bit less than anticipated.

“You see bright spots here and there,” said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. “But I think the supply and demand fundamentals will push us lower.”

The Energy Department reported Wednesday that crude inventories continued to rise last week, and gasoline stockpiles jumped despite predictions for a steep drop.

Crude inventories grew by 2.8 million barrels, or 0.8 percent, to 359.4 million barrels for the week ended March 27, the department’s Energy Information Administration said in its weekly report. Oil stockpiles have not been this high since July 1993, according to EIA data. They’re also 15.5 percent above year-ago levels.

Worsening jobs data is also dimming hope that crude demand could rebound soon. The ADP National Employment Report said Wednesday that private sector employment dropped by 742,000 in March, higher than anticipated.

Supply cuts by the Organization of Petroleum Exporting Countries have helped bolster prices this year. OPEC has pledged to reduce output quotas by 4.2 million barrels a day since September.

Oil will likely trade between $40 and $50 a barrel for the next few months until investors get a clearer picture of whether massive stimulus packages across the globe can spark a second-half recovery, Kornafel said.

“There’s been enough supply removed and it seems we’ve hit economic bottom,” Kornafel said. “I don’t think oil belongs below $40, just as it doesn’t belong above $50.”

In other Nymex trading, gasoline for May delivery rose 5.73 cents to $1.4290 a gallon and heating oil gained 6.87 cents to $1.4145 a gallon. Natural gas for May delivery advanced 4.9 cents to $3.744 per 1,000 cubic feet.


Associated Press writer Alex Kennedy in Singapore contributed to this report.

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