Oil Closes Near $91 as Recession Fears Ease
Oil rose Friday amid optimism a U.S. economic stimulus plan could ward off a recession in the world's top energy consumer.
U.S. crude settled up $1.30 at $90.71 a barrel, while London Brent crude gained $1.83 to settle at $90.90 a barrel.
U.S. oil had traded as high as $91.38 a barrel earlier as the stimulus plan announced by U.S. legislators and the White House Thursday helped lift global stock indexes and countered mildly bearish U.S. weekly oil inventory data.
"This is all about the stimulus package," said Phil Flynn, analyst at Alaron Trading in Chicago. "Oil markets are taking their cue from the stock market."
Prices gave up some of the gains later Friday as U.S. stocks fell on talk of more trouble in the global financial sector and declines in defensive shares offset strong earnings from companies.
U.S. oil has tumbled from a record over $100 a barrel struck Jan. 3 on growing fears crude demand growth could be hit if the subprime mortgage crisis knocks the U.S. economy into recession.
Analysts said funds and speculators had been closing out their positions in oil and commodities to cover margin calls and to finance losses in equity markets, contributing to losses earlier in the week.
"Oil's move up is in step with what's happening in equity markets. Seems like there is a turn in the view that the year ahead isn't going to be so bleak in terms of the U.S. economy and this has knock-on effect on oil," said Global Insight analyst Simon Wardell.
The International Energy Agency's executive director expressed concern about the strength of the world economy and said oil producers could help the situation by pumping more.
The Organization of the Petroleum Exporting Countries will meet Feb. 1 to set production policy, but many analysts believe the cartel will hold back from raising output.
Demand from China continues strong, up around 6.4 percent in December, the highest growth rate in seven months.
The world's No. 2 oil consumer guzzled 7.2 million barrels of oil a day last month, well above the 2007 average of 6.93 million barrels per day, Reuters calculations from official data showed.