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Oil rises above $57 on economic hopes

Oil prices rose above $57 a barrel on Friday in Asia as investors bet that a year-end recovery in the global economy will boost oil demand. Traders have shaken off weeks of dismal economic news amid signs that the slowdown has eased and a recovery could gain steam by the end of the year.

business Updated: May 08, 2009 11:19 IST

Oil prices rose above $57 a barrel Friday in Asia as investors bet that a year-end recovery in the global economy will boost oil demand. Traders have shaken off weeks of dismal economic news amid signs that the slowdown has eased and a recovery could gain steam by the end of the year.

"Market psychology has clearly turned around," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "I could see oil going above $60."

Benchmark crude for June delivery was up 53 cents to $57.24 a barrel by midday in Singapore, in electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose as high as $58.57 a barrel, a six-month high, before settling up 32 cents at $56.47.

Until this week, oil had traded in a range near $50 a barrel since the end of March as investors looked for evidence that the US economy had stabilized after a severe recession in the fourth and first quarters.

On Thursday, several US retailers, led by Wal-Mart Stores Inc., reported better-than-expected April sales, and new applications for jobless benefits fell to the lowest level in 14 weeks, signaling a wave of layoffs may have peaked.

Still, some traders are skeptical that the recent run-up in prices is warranted, given the slump in consumer demand and surging crude inventories. The International Monetary Fund forecasts the global economy will shrink 1.3 percent this year.

"I think the market has gotten a little ahead of itself," Moltke-Leth said. "The fundamentals don't support this recent rally." Investors will be watching for the monthly US jobs report for April. The unemployment rate rose to 8.5 percent in March, the highest since 1983. "It's like the market is saying, "Hey, we're not in free fall anymore, that's good."'

Moltke-Leth said. "But you still have an economy contracting and more people unemployed, and that will continue for a long while."

In other Nymex trading, gasoline for June delivery rose 2.80 cents to $1.69 a gallon and heating oil gained 1.44 to $1.50 a gallon. Natural gas for June delivery jumped 6.8 cent to $4.12 per 1,000 cubic feet. In London, Brent prices rose 80 cents to $57.27 a barrel on the ICE Futures exchange.