AP: Oil rises to near $58 on economic recovery hopes
Oil prices rose to near $58 a barrel Friday as investors bet that a year-end recovery in the global economy will boost oil demand.
Traders have shaken off weeks of dismal economic news to focus on recent signs that the slowdown has eased and a recovery could gain steam by the end of the year - even though many analysts warn oil demand is still weak and stocks remain high.
"Market psychology has clearly turned around," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "I could see oil going above $60."
Benchmark crude for June delivery was up $1.11 to $57.82 a barrel by midday in Europe, in electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose as high as $58.57 a barrel, a six-month high, before settling up 32 cents at $56.71.
In London, Brent prices rose $1.12 cents to $57.59 a barrel on the ICE Futures exchange.
Until this week, oil had traded in a range near $50 a barrel since the end of March as investors looked for evidence that the U.S. economy had stabilized after a severe recession in the fourth and first quarters.
"Oil prices are being driven higher by optimism over economic recovery and in response to soaring equities and associated weakness in the U.S. dollar," said a report from KBC Market Services in Britain. "Some years ago, physical oil market fundamentals used to be the sole driver of oil prices but the growing role of financials has now turned full circle."
On Thursday, several U.S. retailers, led by Wal-Mart Stores Inc., reported better-than-expected April sales, and new applications for jobless benefits fell to the lowest level in 14 weeks, signaling a wave of layoffs may have peaked.
Still, some traders are skeptical that the recent run-up in prices is warranted, given the slump in consumer demand and surging crude inventories. The International Monetary Fund forecasts the global economy will shrink 1.3 per cent this year.
"I think the market has gotten a little ahead of itself," Moltke-Leth said. "The fundamentals don't support this recent rally."
Investors will be watching for the monthly U.S. jobs report for April. The unemployment rate rose to 8.5 per cent in March, the highest since 1983.
"It's like the market is saying, 'Hey, we're not in free fall anymore, that's good."' Moltke-Leth said. "But you still have an economy contracting and more people unemployed, and that will continue for a long while."
In other Nymex trading, gasoline for June delivery rose 2.80 cents to $1.6935 a gallon and heating oil gained 2.63 to $1.5115 a gallon. Natural gas for June delivery jumped 10.5 cents to $4.186 per 1,000 cubic feet.
