Oil gains on bank reports

April 14, 2009 4:34:14 AM PDT
Oil prices gained Tuesday as traders looked to U.S. bank results this week for signs a severe recession may have bottomed out. Oil prices have traded near $50 a barrel for the last two weeks after jumping from below $35 in February as investors struggle to gauge the health of a global economy reeling from its worst slowdown in decades.

Traders have been cheered by early signs that U.S. banks may be stabilizing. Goldman Sachs reported Monday a profit of $1.66 billion for the first quarter, beating Wall Street's earnings expectations, and a huge improvement over the $2.29 billion loss that Goldman reported for the fourth quarter.

Benchmark crude for May delivery rose 86 cents to $50.91 a barrel by noon in European trading on the New York Mercantile Exchange. The contract on Monday dropped $2.19 to settle at $50.05.

Goldman's news, released a day earlier than anticipated, came days after Wells Fargo & Co. said it expected to report record first-quarter earnings of $3 billion, well above Wall Street's estimates. Banking giants Citigroup Inc. and Bank of America Corp. will report earnings later this week.

"We don't have the feeling of being in a free fall anymore," Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. "But we've seen quite a big rally, so I wouldn't be surprised if stock markets and oil come down a little."

The market was still mulling a forecast cut by the Paris-based International Energy Agency, which said Friday it now expects global demand this year will likely fall by 2.4 million barrels a day to 83.4 million barrels, or 2.8 percent lower than last year.

"The old theme of demand destruction is still controlling crude right now," Moltke-Leth. "I see a range of $47 to $53 holding for a while."

Not all energy futures are being buoyed, however by increased optimism that the worst may be over for the world's economy.

Natural gas eked out an increase of just over a cent to fetch $3.64 per 1,000 cubic feet, but remained far below levels of just a few months ago.

"Commercial and industrial demand is limping along, space heating demand is winding down," said trader and analyst Stephen Schork in his Schork Report. "As such, the NYMEX continues to grind lower."

In other Nymex trading, gasoline for May delivery gained close to 2 cents to $1.48 a gallon and heating oil jumped by more than 4 cents to $1.44 a gallon.

In London, Brent prices rose 29 cents to $52.43 a barrel on the ICE Futures exchange.

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Associated Press writer Alex Kennedy contributed to this report from Singapore.

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