Oil prices rose above $53 a barrel yesterday, buoyed by expectations that rich nations’ efforts to stimulate their economies may help end the global downturn sooner than expected.
Japan said it planned to spend at least $100 billion more to help its economy survive the global crisis, as investors seized on signs that markets may have bottomed to buy stocks and commodities.
US light crude for May delivery was up 60 cents at $53.11 a barrel at one stage yesterday. The contract ended 13 cents lower to settle at $52.51 on Friday, as a bounce in Wall Street countered an earlier slide set off by gloomy jobs data.
London Brent crude rose 52 cents to $53.99 a barrel.
In a sign appetite for risk is increasing, gold prices fell more than two per cent yesterday, slipping towards a two-and-half-month low, and stock markets rose.
Analysts said agreement last week by G20 leaders on a $1.1?trillion deal to combat the global economic crisis had raised expectations that the downturn might not be as severe as anticipated, but this optimism could be short-lived.
“The pixie dust that President Obama and the G20 sprinkled on markets last week is still working its magic,” said Christopher Bellew, oil broker at Bache Commodities in London.
“But I think that will blow away as people realise that there is no quick fix for this recession.
“I do not think the oil market will advance much further and I don’t think the recent stock market strength will be sustained.”
Goldman Sachs said yesterday that crude oil price rallies would be short-lived until the second half of 2009 because of weak fundamentals.
It said recent oil price rallies had been fuelled by optimism over future stabilisation in the financial system and in global economic growth, but for the time being these rallies were unlikely to be sustained.
“We continue to expect that a more stable demand environment, reinforced by the likely need for the industry to restock during second-half 2009, will help push the oil market into a sustained deficit later in the year,” he said.
Although crude oil prices have risen roughly 16 per cent so far this year, they are almost 60 per cent below their high of more than $147 a barrel last July.
Analysts said investors might attempt to push oil towards the $55 mark this week, should U.S. stocks rally further on signs that the economic slump is abating and if the earnings season does not get off to a rocky start.
Oil rose nearly 11 per cent last month and snapped two straight quarters of double-digit decline to rally 9.5 per cent in the first quarter.
Crude oil speculators on the New York Mercantile Exchange decreased net long positions in the week to March 31.