Business

Wednesday May 20, 2009

Crude oil price rises above US$60


PETALING JAYA: The price of crude oil for June delivery crossed the US$60 per barrel mark yesterday, close to its six-month high of US$60.28 per barrel on Nov 28, on optimism that the global economy is on its way to recovery.

At press time, June oil price rose 1.8% to US$60.11 while the July contract gained 1.7% to US$60.60 per barrel. June’s contract expired yesterday.

A Bloomberg report said that based on an analysts poll, crude oil stockpiles were likely to decline 1.75 million barrels as of end of last week from 370.6 million the week before. The US Energy Department is expected to release its report this week.

Meanwhile, prices of other commodities like crude palm oil (CPO), soybean and corn were also higher while copper, zinc and nickel staged a rally on the London Metal Exchange and the spot price for gold was also on the rise.

Liquidity has continued to flow into stock markets globally, boosting equities to their highs this year, signalling improving sentiment since last October, when huge funds were repatriated home to ease the credit crisis.

An analyst at OSK Investment Bank said the recovery in oil prices was spurred by anticipation of improving demand on the back of the brighter global economic outlook.

“The PMI (Purchasing Manager’s Index) of China is on a rising trend while consumer sentiment and the US Institute for Supply Management Index are showing signs of bottoming up,” he said.

With oil prices on a rising trend, it would be more economical for oil companies to increase production activities.

“We expect more contracts to flow in as the cost of production has dropped significantly from last quarter and it’s now more profitable for oil companies. This will bode well for related companies as production activities would require support services,” he added.

A head of research of another brokerage said investors were taking positions in the commodities markets in anticipation of the economic turnaround.

“Whether it will be a sustainable recovery, we would need to have more indicators,” he added.

Oil and gas-related stocks on Bursa Malaysia attracted buying interests. Process equipment maker KNM Group Bhd, actively traded yesterday, rose 7 sen to 81 sen, Scomi Group Bhd was up 7.5 sen to 72 sen and Petra Perdana Bhd gained 18 sen to RM2.69.

Plantation and steel stocks were also higher. Kuala Lumpur Kepong Bhd and United Plantations Bhd both added 20 sen to RM11.30 and RM11.10 respectively while Kinsteel Bhd improved by 5 sen to 85 sen and Lion Industries Corp Bhd increased 10 sen to RM1.27.


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