Oil rises above $44 on weak dollar, OPEC supports

Daily News Egypt
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LONDON: Oil rose above $44 a barrel on Friday, after sinking 4 percent in the previous session, gaining support from a weaker dollar and expectations that a meeting of OPEC later this month might cut output further.

The release of US data showing unemployment at its highest level for 25 years kept gains in check, as a deepening slowdown in the world s top oil consumer suggests further curbs on demand.

US crude was up 54 cents at $44.15 a barrel by 1618 GMT after rising as high as $45.45, while London Brent crude eased 15 cents to $43.49 a barrel.

Brent has lost its rare premium to US crude because of a decline in US inventories. High US stocks, particularly at the Cushing oil hub, had been keeping the American marker at a discount to Brent.

OPEC s secretary general, Abdullah Al-Badri, said on Friday current oil prices were creating the risk of a future supply shortfall due to low investment in the industry, even if they were providing a balm for the troubled world economy.

US jobs figures showing that employers axed 651,000 jobs in February kept the global economic downturn close to the forefront, though they were broadly predicted by economists.

The numbers, while bad, were in line with expectations so with the dollar under some pressure it looks like crude may continue to be supported, said Addison Armstrong of Tradition Energy in Stamford, Connecticut.

The dollar remained down after the Labor Department s release of the payrolls report at 1330 GMT. Weakness in the US currency can boost investor demand for oil and other dollar-priced commodities.

I think the US payroll figures are not as bad as they might have been, but they are still not good, said Christopher Bellew, an oil broker at Bache Commodities in London.

Oil was also supported by China s optimism that its domestic economy was recovering and official promises of more swift stimulus action when required. China is the world s second-largest oil consumer.

Top Chinese officials said on Friday substantial fiscal and monetary stimulus was breathing life back into the world s third-biggest economy, suggesting Beijing saw no need to boost the existing investment plan of nearly $600 billion.

Oil has traded in a band from around $33 to $50 since mid-December, pressured by slumping demand due to the economic downturn. Expectations OPEC might cut production again in a bid to boost prices when it meets on March 15 have added support.

OPEC has already agreed to cut production by 4.2 million barrels per day since September, and a Reuters survey found that members have met 81 percent of their output reductions as of last month.

Angola, which holds the presidency of the 12-member group, will not advocate further production cuts when the group meets, OPEC sources said, but Venezuela, Algeria and Libya have raised the possibility of a further cut.

We expect the cartel to put through a modest cut when it gets together and judging by how well the market is holding up, participants seem to be expecting the same, said MF Global.

-Additional reporting by Alex Lawler in London, Jennifer Tan in Singapore and Robert Gibbons in New York

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