RTRS: Oil rises towards $42 before U.S. economic plan
Oil rose $2 toward $42 a barrel on Tuesday, lifted by expectations that the approval of an $800 billion-plus stimulus package by the U.S. government would boost demand for oil in the world's largest energy consumer.
U.S. light crude for March delivery rose $2.00 to $41.56 a barrel by 1422 GMT (9:22 a.m. EST). The contract settled down 61 cents at $39.56 a barrel on Monday.
London Brent crude gained $2.10 to $48.12 a barrel, maintaining its premium against U.S. prices.
"I think the market is expecting the U.S. stimulus package to go through, which should be bullish for oil prices but it's anyone's guess at the moment," said Tony Machacek, a broker at Bache Commodities.
U.S. Treasury Secretary Timothy Geithner was also due to unveil a plan to rescue stricken banks at 11 a.m. (1600 GMT), and the stimulus bill was expected to be passed by the Senate but could still face days of wrangling before its final approval.
Investors worried about whether the separate bank bailout plan would be enough to stem the global financial crisis.
Dallas Federal Reserve President Bank Richard Fisher said on Monday that he did not expect the U.S. economy to grow in 2009 and much hinged on the impact of the package.
The global financial crisis has also slashed world fuel demand and dragged oil prices from a record high of above $147 a barrel in July.
On Monday, OPEC Secretary-General Abdullah al-Badri reiterated the group's willingness to cut oil production further to steady prices at the group's next supply policy meeting on March 15 in Vienna.
But Algerian energy minister Chakib Khelil said the group would be under less pressure to cut output if oil stabilised near the $40 a barrel level.
Al-Badri said the 12-member group appeared to be implementing production cuts more thoroughly than expected by some, with 80 percent compliance.
A weekly national petroleum report from the U.S. American Petroleum Institute as well as the U.S. Energy Information Administration's monthly short-term energy outlook to be released later on Tuesday will give further direction to prices, analysts said.
A Reuters poll showed that U.S. crude inventories rose for the seventh consecutive time last week, because of a drop in refinery utilisation and higher imports.
