Oil rises towards $50
By Joe Brock
Reuters
First Posted 10:32:00 11/21/2008
Filed Under: Oil & Gas - Upstream activities, Energy & Resources
LONDON -- Oil rose towards $50 a barrel on Friday, rebounding from a three and half year low and buoyed by rallies in Europe and Asian equities on talk that China may cut interest rates later in the day.
Oil has fallen by 11.0 percent this week taking it close to a $100 drop from its July record high and setting it on course for the steepest weekly decline since the week of Oct. 6.
US light crude for January delivery rose 35 cents to $49.77 a barrel at 0920 GMT, its first increase after five straight sessions of losses. Earlier it fell to $48.25, the lowest in three and a half years.
London Brent crude gained 58 cents to $48.66 a barrel.
Asian stock markets bounced from a five-year low touched earlier on Friday as a variety of talk such as China cutting interest rates later in the day prompted investors to cover short positions before the weekend.
The buying continued in Europe as mining stocks gained on higher precious metals prices and banks rallied after sharp fall in previous sessions.
"The move through $50 on January US crude yesterday may have been the final push to the downside and if equities can improve a bit we could see that all the considerable amount of bearish news is finally priced in," said Christopher Bellew at Bache Commodities.
STORING OIL
Oil has lost two thirds of its value in just under four months since peaking above $147 in July as the financial crisis grips economies around the globe and limits demand for fuel.
Reflecting the sharp reversal in oil's fortunes, Goldman Sachs, which in May had been talking of a $200 a barrel super-spike, on Thursday again cut its 2009 forecast for US crude oil to $80 a barrel from $86.
As demand tumbles, oil companies plan to store millions of barrels of crude in the hope economics will improve.
Shipping brokers said US oil trader Koch and Royal Dutch Shell had booked supertankers capable of storing 10 million barrels of crude, more than top exporter Saudi Arabia produces in a day.
The steep fall in oil prices has brought more Organization of the Petroleum Exporting Countries members out in support of further output cuts.
Libya's top oil official said the producer group may decide to reduce supply further at its informal meeting in Cairo next week if it finds members have implemented a previous decision to lower output.
The comments followed remarks from other OPEC members, including Kuwait, Iran and Venezuela, raising the possibility of a further cut in supply to prop up oil prices.
OPEC agreed in October to cut output by 1.5 million barrels per day, about 5.0 percent, from Nov. 1, but the move has failed to stem the decline in oil prices.
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