Oil rises above $44 despite grim US corporate news

[March 06, 2009]  NEW YORK (AP) -- Oil prices rose above $44 a barrel Friday on investor optimism that falling U.S. gasoline costs amid the worst recession in decades may increase demand for crude.

Gains were limited, however, as markets awaited February U.S. unemployment figures, due for release later Friday and expected to show the highest jobless rate since 1984.

Benchmark crude for April delivery gained 64 cents to $44.25 a barrel by midday in Europe on the New York Mercantile Exchange.

In London, Brent prices were up 35 cents to $43.99 on the ICE Futures exchange.

U.S. gasoline prices averaged $1.933 a gallon Thursday -- $1.245 a gallon cheaper than they were last year -- and falling fuel costs have helped spark some crude demand.

The government said earlier in the week that crude inventories fell for a second week in three, halting a trend over the previous six weeks that saw inventories jump more than 30 million barrels.

"It's cheap now to fill up your car, and that's starting to have some impact," said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. "There's a sense that because crude has gotten cheaper, demand may be picking up. We've seen inventories surprise on the downside."

Looking ahead, investors are braced for the crucial U.S. jobs report for February that economists predict will show employers slashed 648,000 jobs in February -- more than the 598,000 cut in January.

If they are right, it would mark the worst month of job losses since the recession started in December 2007. It also would represent the single biggest month of job reductions since October 1949, although the labor force has grown significantly since then.

The Nymex April contract fell $1.77 on Thursday to settle at $43.61 a barrel as the Dow Jones industrial average dropped 4.1 percent to a fresh 12-year low on concern General Motors Corp. may face bankruptcy and worries about Citigroup and other big banks.

Crude investors have looked to stock markets as broad measure of investor sentiment on the economy. But oil prices have traded near $40 since December while global stock markets continue to drop.

"Crude is not so directly related to equities as it has been," Moltke-Leth said. "We saw a major sell-off in stocks yesterday, but crude was pretty stable."

Output cuts by OPEC have helped reduce supplies and bolster prices. The Organization of Petroleum Exporting Countries will likely announce another cut production at the group's next meeting on March 15, Moltke-Leth said.

"Supply and demand are pretty much balanced at the moment," he said.

JBC Energy in Vienna, however, said it does not expect OPEC to make any changes to its production quotas at the upcoming meeting.

In other Nymex trading, gasoline for April delivery was up 2.21 cents to $1.3348 a gallon, while heating oil gained 2.43 cents to $1.1841 a gallon. Natural gas for April delivery was up 5.6 cents at $4.144 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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