Oil jumps above $51 on optimism recession slowing

[April 30, 2009]  VIENNA (AP) -- Oil rose above $51 a barrel Thursday as investors took heart from optimistic comments from the U.S. Federal Reserve that the worst recession in decades may well be easing.

The rebound came despite a buildup in U.S. stocks reflecting continued lagging demand.

Benchmark crude for June delivery was up 82 cents to $51.79 a barrel by noon in European electronic trading on the New York Mercantile Exchange. The contract Wednesday gained $1.05 to settle at $50.97.

Investors have brushed off recent dismal news -- such as the 6.1 percent contraction in the U.S. economy in the first quarter -- and pointed to so-called "green shoots" of recovery.

Fed policymakers said at the end of their two-day meeting Wednesday that while the economy is still receding, the pace of decline "appears to be somewhat slower" than the last time they met in mid-March.

Investors, already cheered by signs that U.S. consumer spending is growing, sent the Dow Jones industrial average up 2.1 percent Wednesday.

"Investors are looking ahead and betting that the worst economic declines are over," said Victor Shum, energy analyst with consultancy Purvin & Gertz in Singapore.

Trader and analyst Stephen Schork said that -- once again -- traders were simply following the stock market.

"Oil markets moved higher because ... equities moved higher," he said in his Schork Report.

This month prices have crisscrossed $50 a barrel as surging crude inventories tempered renewed optimism about the economy.

The Energy Information Administration reported Wednesday that oil inventories jumped by 4.1 million barrels for the week ended April 24, more than twice what was expected by analysts, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

U.S. stores of crude have reached levels not seen since Aug. 31, 1990. Government data also show that petroleum consumption is down to 18.4 million barrels a day, the lowest since May 28, 1999.

"Inventories are very high and ought to be a concern," Shum said. "The fundamentals really limit any potential gains in oil,"

Some investors are waiting for the oil price to break above or below a range near $50 before taking a position.

"There hasn't been a strong enough uptrend for us to say there's a clear technical trend," said Aaron Smith, managing director at Superfund Financial in Singapore.

In other Nymex trading, gasoline for May delivery rose by more than a cent to $1.46 a gallon and heating oil by less than a penny to $1.33 a gallon. Natural gas for June delivery fell by close to 4 cents to fetch $3.37 per 1,000 cubic feet.

In London, Brent prices rose 35 cents to $51.13 a barrel on the ICE Futures exchange.

[Associated Press; By GEORGE JAHN]

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

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