Oil jumps to above $51 on stock market gains

[April 02, 2009]  NEW YORK (AP) -- Oil jumped to above $51 barrel Thursday as stock markets soared in Asia and Europe and investors saw glimmers of hope that the U.S. economy may be stabilizing.

Investors were also focusing on any stimulus and reforms agreed at the ongoing Group of 20 world leaders' summit in London as well as an expected interest rate cut by the European Central Bank.

Benchmark crude for May delivery was up $2.92 to $51.31 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. The contract fell $1.27 on Wednesday to settle at $48.39.

In London, Brent prices rose $3.10 to $51.54 a barrel on the ICE Futures exchange.

Oil prices have pulled back from 3-month highs of above $54 a barrel last month as investor optimism that the global recession may be bottoming waned. Still, some investors have taken heart from improving U.S. housing data that the worst could be over.

Pending home sales rebounded in February from a record low, the National Association of Realtors reported Wednesday, while the Institute for Supply Management's index of manufacturing activity contracted in March but by a bit less than anticipated.

"You see bright spots here and there," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "But I think the supply and demand fundamentals will push us lower."

The Energy Department reported Wednesday that crude inventories continued to rise last week, and gasoline stockpiles jumped despite predictions for a steep drop.

Crude inventories grew by 2.8 million barrels, or 0.8 percent, to 359.4 million barrels for the week ended March 27, the department's Energy Information Administration said in its weekly report. Oil stockpiles have not been this high since July 1993, according to EIA data. They're also 15.5 percent above year-ago levels.

Worsening jobs data is also dimming hope that crude demand could rebound soon. The ADP National Employment Report said Wednesday that private sector employment dropped by 742,000 in March, higher than anticipated.

Supply cuts by the Organization of Petroleum Exporting Countries have helped bolster prices this year. OPEC has pledged to reduce output quotas by 4.2 million barrels a day since September.

Oil will likely trade between $40 and $50 a barrel for the next few months until investors get a clearer picture of whether massive stimulus packages across the globe can spark a second-half recovery, Kornafel said.

"There's been enough supply removed and it seems we've hit economic bottom," Kornafel said. "I don't think oil belongs below $40, just as it doesn't belong above $50."

In other Nymex trading, gasoline for May delivery rose 4.83 cents to $1.42 a gallon and heating oil gained 6.78 cents to $1.4136 a gallon. Natural gas for May delivery advanced 4.2 cents to $3.737 per 1,000 cubic feet.

[Associated Press; By PABLO GORONDI]

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

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.