Published: Tuesday May 12, 2009 MYT 7:26:00 AM
Updated: Tuesday May 12, 2009 MYT 3:52:45 PM

Oil hovers above US$58 on signs recession easing(update)

SINGAPORE: Oil prices hovered above $58 a barrel Tuesday in Asia on growing investor optimism that the worst U.S. recession since World War II may have bottomed.

Benchmark crude for June delivery was down 23 cents to $58.27 a barrel midday in Singapore, in electronic trading on the New York Mercantile Exchange.

On Monday, the contract fell 13 cents to settle at $58.50.

Oil prices have jumped from below $35 a barrel in February amid signs the pace of economic deterioration has slowed, setting the scene for an eventual recovery.

"The feeling is we've seen the worst of it, and the only way now is up," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney.

"Some of this is also a trading momentum play."

Investors will be eyeing first-quarter earnings figures this week from retailers including Wal-Mart Stores Inc. and Macy's Inc., while the government reports retail sales for April.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, has been undermined by rising unemployment, which climbed to 8.9 percent in April.

"There's still a lot of unemployment out there," Rigby said. "Companies aren't hiring yet, and that's what would increase demand."

Traders will also be watching the weekly petroleum inventory data for the week ended May 8 from the Energy Information Agency on Wednesday. Analysts expect inventories to increase by 1.4 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Crude stocks rose 600,000 barrels last week and are near 19-year highs.

"Inventories are still going up," Rigby said. "We're not seeing an increase in crude demand, so there's no pressure on supply."

In other Nymex trading, gasoline for June delivery was steady at $1.68 a gallon and heating oil dropped 0.59 cent to $1.50 a gallon.

Natural gas for June delivery rose 3.8 cents to $4.38 per 1,000 cubic feet.

In London, Brent prices fell 9 cents to $57.39 a barrel on the ICE Futures exchange. - AP

Earlier report

COLUMBUS, Ohio: Energy prices eased Monday as investors appeared to second-guess a 10 percent surge in the value of crude last week on the New York Mercantile Exchange.

Benchmark crude for June delivery fell 13 cents to settle at $58.50 a barrel.

On Friday, the contract rose $1.92 to settle at $58.63 a barrel, the highest level this year, and about 80 percent above the $32.40 per barrel reached on Dec. 19.

Retail gasoline prices, which have risen more that 15 cents a gallon in the last week, continued to move upward overnight.

Optimism over an economic recovery, or at least the belief that things may not get worse, have pushed energy prices higher with some expecting a rebound in demand.

Oil prices have followed the stock market, which has soared since hitting bottom in early March with the Standard & Poor's 500 benchmark index up 37.4 percent.

The Dow Jones industrial average and the S&P 500 also were lower Monday with both indexes down more than 1 percent.

Regardless, oil prices continue to rise even though demand has hit its lowest level since the Sept. 11, 2001, terrorist attacks.

Crude inventories are at their highest levels since 1990 when Iraq invaded Kuwait. "In my mind, this is a market that is looking for an excuse to go higher," said Phil Flynn of Alaron Trading Corp.

But with a weaker stock market and analysts expecting another build in inventories when the government releases its weekly report Wednesday, oil is being held in check, he said

"They're buying just to buy into the momentum," said analyst and trader Stephen Schork.

"No one is looking at the fundamentals."

Prices at the pump continued to trek higher Monday, moving up 1.3 cents to a national average of $2.226 a gallon (59 cents a liter), according to auto club AAA, Wright Express and Oil Price Information Service.

Prices are 17.4 cents a gallon higher than last week,

Rising pump prices are the norm for May, however, because refiners are switching over to more expensive blends of gasoline that are required to meet state and federal emissions requirements.

There are also refineries still operating at reduced levels due to annual maintenance, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

One more reason why gas prices are rising: gasoline futures on Nymex have been rising on the same optimism that has boosted crude and equities markets.

Reformulated gasoline traded in New York, the major trading center for both imports and domestic fuel, is up about 10 cents in the last week.

As fast as gas prices have risen, they remain far below last year at this time when a gallon of gas cost almost $1.50 (39 cents a liter) more.

In other Nymex trading, gasoline for June delivery fell 2.53 cents to settle at $1.6802 a gallon and heating oil dropped 1.75 cents to settle at $1.5009 a gallon.

Natural gas for June delivery slid 2.6 cents to $4.285 per 1,000 cubic feet.

In London, Brent prices fell 66 cents to settle at $57.48 a barrel on the ICE Futures exchange. - AP

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