BLBG: Oil Rises, Reversing Decline, on Mideast Concern, Stimulus Plan
Crude oil rose on concern that the conflict in the Gaza Strip may spread and confidence an Obama stimulus plan may help boost the economy.
Oil gained as Israeli warplanes bombarded Palestinian targets, adding to speculation that the conflict may disrupt crude supplies from elsewhere in the Middle East. President-elect Barack Obama is asking that tax cuts make up 40 percent of a stimulus package, according to a transition official and Democratic aides.
“You’ve got the fighting in the Mideast, you’ve got the Obama stimulus plan putting some actual meat on the bones there to help the economy,” said Roger Read, an analyst at Natixis Bleichroeder Inc. in Houston.
Oil for February delivery rose 58 cents, or 1.3 percent, to $46.92 a barrel as of 9:44 a.m. in New York Mercantile Exchange trading. The contract rose as high as $48.68 a barrel.
Crude fell earlier as the U.S. dollar extended gains versus the euro, reducing the appeal of commodities as a currency hedge, and as traders sold contracts after a 31 percent rally in the previous five sessions.
Oil also rose as an official from a Persian Gulf member of Organization of Petroleum Exporting Countries said the group is likely to make all the oil production cuts promised at its last meeting, causing global crude stockpiles to fall this quarter.
Prices climbed 23 percent last week, the most since August 1986, buoyed by the Gaza conflict, a natural gas dispute between Russia and Ukraine, and a rebound in equity prices. Oil tumbled 27 percent the week before.
Stimulus Package
President-elect Obama’s economic stimulus package will include hundreds of billions of dollars worth of tax breaks for individuals and businesses, according to a transition official and Democratic aides.
Obama’s recovery measure may be worth as much as $775 billion, a Democratic aide says, meaning tax cuts may constitute more than $300 billion of the legislation.
“The economic front still looks to be bearish,” said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut. “The trend is still lower, though some factors are mitigating the downward bias.”
