Oil up to near $53 as investors ride momentum

[April 06, 2009]  LONDON (AP) -- Oil prices rose to near $53 a barrel Monday as investors sought to ride the momentum from a two-month rally in crude prices on expectations that the U.S. recession may be bottoming out.

Benchmark crude for May delivery was up 42 cents to $52.93 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. The contract fell 13 cents on Friday to settle at $52.51.

In London, Brent prices rose 38 cents to $53.85 a barrel on the ICE Futures exchange.

Crude has jumped from below $35 a barrel in February as investor concerns have eased that the ailing U.S. economy would enter a depression and drag the rest of the world with it. Traders will be watching corporate earnings announcements for signs the recession may have bottomed in the first quarter and for company guidance about coming quarters.

Aluminum producer Alcoa Inc. is set to kick off first-quarter earnings season on Tuesday.

Still, some traders are skeptical whether oil demand that's reeling from a global recession can justify much higher crude prices.

"The good feeling is hanging on, but I still think this is a bear-market rally," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "I think crude is going to see some pretty firm resistance around $55, then go back down to the low $40s."

Investors were cheered last week by the G-20 meeting in London, where leaders agreed to resist the lure of protectionism during the economic crisis. The nations also pledged more than $1 trillion to combat the global financial crisis.

"The underlying sentiment after this meeting was pretty positive," Moltke-Leth said. "Compared to the depression of the 1930s, the international community is showing that it is committed to working together."

U.S. energy consultancy Cameron Hanover said several factors were contributing to the oil market gains.

"Prices have been advancing, more or less, for seven weeks, and traders seem to have bought into economically vague but hopeful events, a weaker U.S. dollar, higher equities and the seasonal tendency of prices to advance at this time of year," Cameron Hanover said in a note to clients.

Investors also brushed off a grim U.S. jobs report on Friday that showed the unemployment rate rose to 8.5 percent in March, a 25-year high.

Concerns that growth could remain weak for years -- as companies and individuals shed debt and credit remains tight -- will likely dampen oil prices this year, Moltke-Leth said.

"Until the credit market really loosens up, you won't see a long-term sustained rally in commodities," Moltke-Leth said. "We may have to live with 2 to 2.5 percent growth."

Others, however, said the rising trend was feeding on speculators' return to the oil market even despite the weak economy.

"With the growing acceptance that oil prices are on the rise, albeit gradually and almost certainly not without occasional hiccups, more and more hot money is likely to underpin prices," said a report by Britain's KBC Market Services. "The speculators are doing the oil market, and OPEC, a big favor."

In other Nymex trading, gasoline for May delivery rose 1.08 cents to $1.5032 a gallon and heating oil gained 1.05 cents to $1.4565 a gallon. Natural gas for May delivery advanced 2.7 cents to $3.828 per 1,000 cubic feet.

[Associated Press; By PABLO GORONDI]

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

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