Oil Surges $3 to Close Above $90 a Barrel
Oil jumped $3 to above $90 per barrel following OPEC's decision to leave output unchanged and as weakness in the U.S. dollar propped up commodities.
OPEC agreed on Wednesday to keep output restrictions in place, shrugging off calls from consumer nations for more supply to stem sliding stockpiles ahead of winter.
Algeria's oil minister on Thursday added the group could consider cutting back production if the U.S. economy falls into recession.
U.S. light, sweet crude futures
London Brent crude
The rebound stemmed a sharp sell-off since the peak near $100 per barrel in late November propelled by growing uncertainty over the health of the U.S. economy.
Oil rose early Thursday on the weaker U.S. dollar, and gained momentum after the Bush administration outlined a plan aimed at slowing the wave of homeowner foreclosures stemming from the subprime mortgage crisis and preventing a recession.
"Investors have been shifting from concern about inflation to concern about a weak economy, so the Bush administration's actions to support the economy could be mildly supportive for crude," said Eric Wittenauer of A.G. Edwards.
U.S. dollar weakened against the euro after the European Central Bank left interest rates on hold but President Jean-Claude Trichet warned of "strong upward pressure" on inflation.
The Bank of England cut rates by 25 basis points.
"It's the dollar's weakness that has pushed prices higher here," said Tom Bentz of BNP Paribas Commodity Futures.
The falling greenback has supported dollar-denominated commodities, raising the purchasing power of non-dollar nations and reducing the relative value of producer revenues.
The weakening greenback, an influx of speculative cash and concerns over consumer nation inventories going into the Northern Hemisphere winter pushed oil up 40 percent from August to late November.
Worries that economic problems in top oil consumer the United States could cut energy demand growth knocked oil 12 percent off a record $99.29 per barrel struck on Nov. 21.
These concerns dragged oil lower on Wednesday, after OPEC rejected consumers' requests to raise production and kept output flat at a meeting in Abu Dhabi.
The decision came as government data showed an 8 million barrel drop in U.S. crude stockpiles last week to their lowest level in more than two years. Distillate stocks including heating oil rose by 1.4 million barrels, however, and gasoline inventories rose 4 million barrels.
A report earlier this week that contradicted the Bush administration's assertion that Iran was intent on developing a nuclear bomb also eased concerns a standoff with the West could cut supplies from the OPEC nation.