MW: Crude rallies as euro-zone rates cut less than forecast
Petroleum futures stage strong gains as global stocks extend move higher
Crude-oil futures soared Thursday, rallying as the European Central Bank surprised markets by cutting interest rates less than expected and in turn triggered a slump in the U.S. dollar and a rally in the euro.
Investor optimism over a swift economic recovery and thereby a rebound in demand for energy also boosted oil prices.
Crude for May delivery rose $3.22, or 6.6%, to stand at $51.56 a barrel in electronic trading on Globex.
Earlier, the contract soared to an intraday high of $52.36 a barrel.
"The ECB has got us rocking today," said Phil Flynn, vice president at Alaron Trading in Chicago.
"It seems to be the biggest factor," Flynn said. "It's an amazing turnaround for the ECB because some people speculated that they might go in and buy some debt, but they turned around and cut rates less than expected and that was very bullish for commodities."
The euro soared against the U.S. dollar, playing off the ECB reducing its benchmark rate by a quarter of a percentage point, to 1.25%, a record low. Most economists had been looking for a cut to 1%. Read more.
"Hopes for an economic turnaround and the return of demand have been behind the rise on Thursday, along with a broadly weaker dollar and surging global equity markets," said analysts at Action Economics.
Also boosting oil prices was enthusiasm seen in world equities markets following news that the Group of 20 nations may decide to boost the resources of the International Monetary Fund. See full story.
On Wall Street, U.S. stocks surged at the open, bolstered by thinking the U.S. economy may be showing signs of bottoming out.
"Today, markets have generally registered assent with the idea that the worst may have passed," said John Kilduff, an analyst at MF Global.
"Of course, this idea may be dashed by the release of the Labor Department's March jobs report tomorrow," Kilduff said. He expects the recent $45-to-$50 trading range for crude to remain in place.
Also on Globex, May reformulated gasoline rose 7 cents, or 5.3%, to $1.44 a gallon and May heating oil soared 8 cents, or 5.6%, to $1.42 a gallon.
Natural gas for May delivery rose but less so, up 7 cents to $3.77 per million British thermal units, ahead of data on U.S. gas in storage for the week ended March 27. The Energy Information Administration will likely report a buildup of between zero and 5 billion cubic feet in inventories, according to a Platts survey of analysts.
