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Oil rises above $54

PABLO GORONDI

Wednesday, May 06, 2009

Oil prices rose above $54 (U.S.) a barrel Wednesday as comments by the U.S. central bank chief stoked investor optimism that economic growth and crude demand may pick up by the end of the year.

A report showing a fall in U.S. stocks of oil and gasoline also helped sustain prices.

Benchmark crude for June delivery was up 35 cents to $54.19 a barrel by midday in Europe, in electronic trading on the New York Mercantile Exchange. The contract Tuesday fell 63 cents to settle at $53.84.

In London, Brent prices rose 43 cents to $54.55 a barrel on the ICE Futures exchange.

On Tuesday, Federal Reserve Chairman Ben Bernanke gave his most optimistic prediction yet about the end of the U.S. recession, saying he expects the economy to start growing again this year.

Mr. Bernanke cited firmer home sales, a revival in consumer spending and some improvement in lending conditions for banks, businesses and individual borrowers.

Pending U.S. home sales rose more than forecast on Monday and had their second straight monthly gain, while on Tuesday the Institute for Supply Management's non-manufacturing business index jumped in April, beating analysts' expectations.

Oil has traded near $50 a barrel for more than a month after dropping from a record $147 last July and rising from below $35 in February.

“We might be poised for a break out,” said Toby Hassall, an analyst with investment firm Commodity Warrants Australia in Sydney. “The signs are promising. Some of these leading indicators are encouraging.”

Some energy analysts continued to emphasize the link with global equity prices. Wednesday's gains in Asian and European stock markets helping sustain oil prices.

Olivier Jakob of Petromatrix in Switzerland said the Nymex contract could break above $55 Wednesday “if the equities do not fall off the cliff.”

Traders will be watching the weekly petroleum inventory data for the week ended May 1 from the Energy Information Agency on Wednesday. Analysts expect a build of 2.2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Crude stocks rose 4.1 million barrels last week and are near 19-year highs.

Another factor pushing oil prices higher was Tuesday's survey of refinery and pipeline operators by the American Petroleum Institute, which showed a fall in stocks of crude and gasoline.

“The API report was surprisingly bullish,” U.S. energy consultancy Cameron Hanover said in a note to clients. “If the API report turns out to have been prescient in its figures, in regard to the DOE statistics this morning, we would have to expect to see prices rally.”

Investors are also anticipating the U.S. bank stress test results on Thursday and April unemployment figures on Friday.

“It's going to be difficult to see a sustained rally given the fundamentals of high inventories that are still rising,” Mr. Hassall said. “Unemployment is also still rising, which doesn't bode well for a pick up in consumer demand.”

In other Nymex trading, gasoline for June delivery rose 1.02 cents to $1.5824 a gallon and heating oil gained 0.51 cent to $1.4313 a gallon. Natural gas for June delivery was up 0.03 cent to $3.618 per 1,000 cubic feet.

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