LONDON, May 29 — Oil rose to a six-month high above US$66 per barrel today, on track for its largest monthly percentage gain in more than a decade, after Japanese and US data suggested the economic downturn may be moderating.
Oil prices have jumped around 30 per cent this month, buoyed by expectations of a global economic recovery later this year and a bullish price outlook from key OPEC member Saudi Arabia. It is the largest monthly price rise since March 1999.
US crude oil for July delivery was up US$1 (RM3.50) at US$66.08 (RM231.28) per barrel by 1122 GMT (7.22pm, Malaysia), after reaching a high of US$66.25, its highest level since early November last year.
London Brent crude gained 92 cents to US$65.31.
Data on Friday showed Japanese industrial production rose 5.2 per cent in April on a monthly basis, and the government said it expected continued gains through June.
Better US durable goods orders figures on Thursday also reinforced the sense that the global economic slump might be abating, despite a disappointing US home sales report and lingering concerns over mounting Western government debt.
“Oil prices are rising despite weak current fundamentals,” said David Hufton, managing director of brokers PVM in London.
“They are going up because speculators are hopeful that a bottom has been reached and an economic recovery is about to take place which will be V rather than W, U or L-shaped.”
US DATA
Another supportive influence was a report by the US Energy Information Administration on US crude oil stocks, which fell 5.4 million barrels in the week to May 22, way above analysts’ expectations in a Reuters poll for a 700,000 barrel decline, as refiners raised output before the summer driving season.
Gasoline inventories also fell for the fifth week in a row as demand rose in the week preceding the Memorial Day holiday, which traditionally marks the start of the summer driving season in the United States.
“The market has reacted to the headline figures,” said Harry Tchilinguirian, analyst at BNP Paribas in London. “That has helped extend technical buying as we moved above the psychologically important 200-day moving average (MA).”
The front month for US crude oil futures crossed up through its 200-day MA on its daily price chart on Tuesday and it is now acting as a strong support, according to technical analysts who track prices on charts.
OPEC’s decision to hold oil production steady also helped prop up prices.
The producer group yesterday kept its output targets unchanged as the market had expected, betting on a strengthening world economy and tentative signs of increased demand.
Analysts said Saudi Arabia’s statement this week that the global economy could now cope with US$75-80 a barrel oil was a shift from the world’s largest oil producer, which has until recently hinted it would be happy with a lower price to help the world economy back on its feet.
Investors will be keeping a close watch on economic data due later, including US first-quarter preliminary GDP figures and Reuters/University of Michigan May consumer sentiment. – Reuters
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