LSE: UPDATE 5-Oil rises with equity markets on China hopes
LONDON, May 29 (Reuters) - Crude oil rose above $107 a barrel on Tuesday, along with gains in global equities on hopes for Chinese economic stimulus, though fears of euro zone debt contagion on one hand and of Middle East supply disruptions on the other limited any moves.
U.S. shares rose more than 1 percent on hopes China may unleash more spending measures and as Greek election polls pointed to support for pro-bailout parties.
'At the moment, we're in a bad news vacuum and that's helping things stabilize,' said Guy Wolf, macro strategist at Marex Spectron. 'The underlying environment is still poor, but markets had become quite over-sold in the short term.'
'Brent is oscillating with equities and currency movements,' said Eugen Weinberg, an analyst at Commerzbank in Frankfurt, 'The market is in balance at the moment but it is too soon to say it has bottomed out.'
Brent crude for July delivery rose 57 cents to $107.68 per barrel by 1433 GMT after hitting a high of $108.04 in the previous session.
U.S. crude oil futures were up $1.00 to $91.86, with the return of market players after the U.S. Memorial Day holiday.
'There is a tug of war between a renewed geopolitical premium and the prospect of a weakening global economy on the back of the euro zone crisis,' said Olivier Jakob at consultancy Petromatrix.
Spain's decision to recapitalise nationalised lender Bankia means its debt could rise. Spain will recapitalise Bankia by issuing new debt, not by injecting bonds into the lender. The bank asked for 19 billion euros in government help in addition to 4.5 billion the state has already pumped in.
This method could be used to prop up other troubled lenders, which could push the country's debt above the 79.8 percent of economic output that had been expected this year.
Outside of Europe, Chinese data this week is likely to affirm economic weakness in the world's No. 2 oil user even as the government steps up stimulus measures.
A Reuters poll showed China's official manufacturing managers' index may have eased in May from a 13-month high in April.
'Companies are making contingency plans for the Grexit (Greek euro zone exit) and Spanish troubles so they are investing less. Nobody wants to be caught with high inventories like in 2008, so factories are reducing output. I think this explains the disappointing Chinese data,' said Jakob of Petromatrix.
