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Oil trades around $54 on stock market rally

Oil trades around $54 on stock market rally

Oil prices topped briefly $54 a barrel Monday, getting a boost from stock investors who seemed hopeful a new plan to resolve America's banking crisis would spur economic growth. Better-than-expected housing news helped too.
Benchmark crude for May delivery rose $1.73 to settle at $53.80 a barrel on the New York Mercantile Exchange, continuing its upward momentum. Prices climbed as high as $54.05.
On Friday, oil ended the week above $50 a barrel for the first time this year, and prices have risen more than 30 percent this month.
In London, Brent prices rose $2.25 to settle at $53.47 on the ICE Futures exchange.
"Generally, we've had moderately good economic news of late," said Michael Lynch, president of Strategic Energy & Economic Research. "That's giving people some optimism that maybe demand will be picking up. If the (new banking) plan is effective, so much the better."
The Obama administration's latest initiative to revive consumer and business lending, introduced Monday by Treasury Secretary Timothy Geithner, seeks to combine government and private resources to purchase an initial half-trillion dollars of bad assets off the balance sheets of banks. Eventually, the plan could grow to $1 trillion.
Also Monday, the National Association of Realtors said sales of existing homes rose from January to February. But the median sales price plunged to $165,400, down 15.5 percent from $195,800 a year earlier. That was the second-largest drop on record.
In a major energy deal announced Monday, Suncor Energy Inc. said it will acquire Petro-Canada for $15.5 billion, uniting two of Canada's biggest oil companies. If the deal is approved, it would create the largest oil company in Canada with a market capitalization of about $38 billion.
Wall Street reacted positively to the day's news, as the Dow Jones industrial average rose more than 4 percent in afternoon trading. Other leading U.S. market indicators also soared,
Stock market indexes closed mostly stronger in Asia and Europe.
The U.S. Federal Reserve said last week it will pump $1.2 trillion into the economy to lower interest rates on mortgages, which could by extension prop up oil prices, analysts say. Such an influx weakens the dollar against the euro and the British pound and increases the allure of commodities like oil and gold.
"The dollar may be key for the trend change in energy," Phil Flynn, an analyst at Alaron Trading Corp., said in a report Monday. "The energy complex turnaround has not been triggered by demand but by the central bank action."
Some, however, cautioned that the advance may not be sustainable as global oil demand remains weak.
"Oil pricing is driven by the financial rally. It's questionable whether $50 is the new floor because the fundamental picture for oil has not changed. Demand remains weak in the near term and oil pricing may be vulnerable," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
Algeria's Energy Minister Chakib Khelil predicted Sunday that crude oil prices could hit $60 per barrel by the end of the year.
Bank of America Securities-Merrill Lynch has also raised its forecast for crude prices to $52 a barrel this year, from $50 a barrel, on the back of a tighter-than-expected oil market balance.
In other Nymex trading, gasoline for April delivery rose 3.1 cents to settle at $1.4881 a gallon, while heating oil added 8.73 cents to settle at $1.4707 a gallon. Natural gas for April delivery rose 6.7 cents to settle at $4.294 per 1,000 cubic feet.
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Associated Press writers Pablo Gorondi in Budapest, Hungary, and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.


Updated : 2021-10-23 23:24 GMT+08:00