Oil above $50 despite swine flu concern

[March 19, 2010]  VIENNA (AP) -- Oil prices rose above $50 a barrel Wednesday on hopes of a nearing end to the global economic slump but concerns that a swine flu outbreak could further depress demand tempered market optimism.

The swine flu virus is suspected in 159 deaths and 2,498 illnesses across Mexico, the epicenter of the outbreak. The disease spread to more countries Tuesday, with confirmed cases in New Zealand and Israel, joining the United States, Canada, Britain and Spain.

Investors are watching for whether fear of the virus will keep travelers at home and hit an already weak global economy.

Benchmark crude for June delivery was up 80 cents to $50.72 a barrel by noon in European electronic trading on the New York Mercantile Exchange. The contract Tuesday fell 22 cents to settle at $49.92.

"It's not that big a deal so far, but it put a brake on the upward trend in oil prices," said Gerard Rigby, an energy analyst with First Fuel Consulting in Sydney. "If it keeps getting worse, it could hit airline travel."

Prices rose above $51 on Friday from $45 earlier last week on investor optimism that the worst of the global economic downturn may be over.

The New York-based Conference Board said Tuesday its Consumer Confidence Index rose more than 12 points to 39.2, up from a revised 26.9 in March. The reading marks the highest level since November's 44.7 and well surpassed economists' expectations for 29.5.

"There's a sentiment that things can't get much worse, that demand won't keep falling," Rigby said.

Prices, which bounced off five-year lows near $35 a barrel in February, have snaked around the $50 a barrel level this month. Still, even before the swine flu outbreak, investor concern that an eventual recovery could be weaker than expected have kept prices from rising further.

Traders will be eyeing the weekly petroleum inventory data from the Energy Information Agency on Wednesday. Analysts expect a build of 1.8 million barrels in crude stocks, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Crude stocks already are near 19-year highs.

"The market is looking for evidence of demand improving, and so far we haven't seen it yet," Rigby said.

In other Nymex trading, gasoline and heating oil for May delivery rose by nearly 2 pennies to $1.42 and $1.33 a gallon.

Natural gas for June delivery was up marginally at $3.45 per 1,000 cubic feet -- an already low level that Vienna's JBC Energy said could be further tested.

"Waning fundamentals are continuing to push natural gas prices down," said a JBC research note. "The main factor behind the fall is the weak demand for the fuel, which is keeping the market oversupplied."

In London, Brent prices rose 81 cents to $50.80 a barrel on the ICE Futures exchange.

[Associated Press; By GEORGE JAHN]

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

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