Oil prices rise back above $50

November 24, 2008

But worries about falling demand for oil because of the broadening recession kept a lid on prices.

By midday in Europe, light, sweet crude for January delivery was up 91 cents to $50.84 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe, trading in a range between $48.80 and $51.34. On Friday, the contract gained 51 cents to settle at $49.93.

In London, December Brent crude rose 90 cents to $50.09 on the ICE Futures exchange.

News that Obama plans to name New York Federal Reserve Bank President Timothy Geithner as treasury secretary, Lawrence Summers as director of the National Economic Council and New Mexico Gov. Bill Richardson as commerce secretary helped boost U.S. stocks.

"The lack of clarity as to who exactly is in charge of steering the U.S. economy is really hurting the equity markets," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "So putting together the new team gives a bit of a reassurance to the market, even if Obama isn't president yet."

Obama will be sworn in on January 20.

The Dow Jones industrial average rose 6.5 percent Friday and European markets were up sharply Monday even though Asian markets were lower.

Hong Kong's Hang Seng index fell 1.6 percent and South Korea's Kospi was down 3.5 percent, but the FTSE 100 in London was up 4 percent, the CAC-40 in Paris gained 3.7 percent and Germany's DAX was 3 percent higher.

News overnight that the U.S. government will take a $20 billion stake in Citigroup and guarantee hundreds of billions of dollars in risky assets has also reduced speculation over another major banking failure, pushing stock markets higher in European trading.

Oil futures have followed stock markets recently, using equities as a proxy for economic outlook and investor sentiment.

"There's likely to be more bad economic news," Shum said. "There isn't enough clarity in the global economic picture. Oil prices are still looking for a bottom."

The future of Ford Motor Co., Chrysler LLC, and General Motors Corp. is also uncertain after Congress postponed debates on aid to the automakers.

Investors are looking for signs the Organization of Petroleum Exporting Countries, which accounts for 40 percent of global supply, may reduce output quotas. Venezuelan Oil Minister Rafael Ramirez said Sunday that OPEC should cut oil production by 1 million barrels per day at an informal meeting Nov. 29 meeting in Cairo.

The group, which cut output by 1.5 million barrels a day last month, will hold its next official meeting on Dec. 17.

"It's still a big question mark whether OPEC will make an additional cut at the Cairo meeting," Shum said. "Chances are better for a cut at the December meeting. Talk of a cut is providing some support for prices."

Analyst Olivier Jakob of Petromatrix in Switzerland agreed, saying that only the timing of the new OPEC output reduction was uncertain, not the cut itself.

"We have the feeling that OPEC is keeping all its options not really as to whether they will cut further but as to when they will announce it," Jakob said in a market report.

In other Nymex trading, gasoline futures fell 0.41 cent to $1.0602 a gallon. Heating oil was down $1.31 to $1.6865 a gallon while natural gas for December delivery jumped 17.5 cents to $6.655 per 1,000 cubic feet.

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

Copyright © 2022 WPVI-TV. All Rights Reserved.