Daily Independent (Lagos)
By Adeola Yusuf (With Agency Reports)
7 April 2009
Lagos — Oil price climbed down from $52 per barrel (pb) on Monday as the Organisation of Petroleum Exporting Countries (OPEC) said it is, at the moment, content with about $50 pb.
OPEC members, among them Nigeria, stated through their Secretary, Hassan el-Badri, at the weekend that oil would take time to sell at the target $70 pb.
By mid-afternoon in Europe on Monday, benchmark crude for May delivery was down $1.17 to $51.34 pb in electronic trading on the New York Mercantile Exchange. The contract fell 13 cents on Friday to $52.51.
In London, Brent prices fell 95 cents to $52.52 pb on the ICE Futures exchange.
Earlier on Monday, the Nymex contract had risen as high as $53.60 as investors sought to ride the momentum from a two-month rally in prices on expectations that the United States recession may be bottoming out.
But renewed worries about more troubles in the banking sector and the apparent collapse of IBM Corp's $7 billion acquisition of Sun Microsystems Inc pushed European stock markets into the red and pointed to a lower opening on Wall Street.
Crude has jumped from below $35 pb in February as investor concerns have eased that the ailing U.S. economy would enter a depression and drag the rest of the world with it.
Traders will be watching corporate earnings announcements for signs the recession may have bottomed in the first quarter, and for company guidance about coming quarters.
Aluminum producer, Alcoa Inc, was set to kick off the first-quarter earnings season on Tuesday.
Still, some traders are sceptical whether oil demand that is reeling from a global recession can justify much higher crude prices.
"The good feeling is hanging on, but I still think this is a bear-market rally," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore.
"I think crude is going to see some pretty firm resistance around $55, then go back down to the low $40s."
Investors were cheered last week by the G20 meeting in London, where leaders agreed to avoid protectionist measures during the economic crunch. The G20 also pledged more than $1 trillion to combat the global financial crisis.
"The underlying sentiment after this meeting was pretty positive," Moltke-Leth said. "Compared to the depression of the 1930s, the international community is showing that it is committed to working together."
U.S. energy consultancy, Cameron Hanover, noted that several factors contribute to oil market gains.
"Prices have been advancing, more or less, for seven weeks, and traders seem to have bought into economically vague but hopeful events, a weaker U.S. Dollar, higher equities and the seasonal tendency of prices to advance at this time of year," Cameron Hanover said in a note to clients.
Investors also brushed off a grim U.S. jobs report on Friday that showed that unemployment rate rose to 8.5 per cent in March, a 25-year high.
Concerns that growth could remain weak for years as companies and individuals shed debt, and credit remains tight will likely dampen oil prices this year, Moltke-Leth added.
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