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Oil eases but stays strong above $53 in Asia
2009-03-23
KUALA LUMPUR, Malaysia - Oil prices eased Tuesday in Asia but stayed above $53 a barrel on hopes that the U.S. government's move to purge ailing banks of up to $1 trillion of toxic assets could speed up economic recovery. Benchmark crude for May delivery dipped 26 cents to $53.54 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract climbed as high as $54.05 on Monday before settling at $53.80, up $1.73. Oil prices have risen more than 30 percent this month. "Prices have dropped a bit this morning but remain well above $53, which is a very strong price. The question really is whether this rally is sustainable," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. Shum said oil and other commodities have rallied in tandem with world stock markets following the U.S. government's recent measures to bail out banks and bolster an economic recovery, but downside risks remain with no signs of oil demand improving. "Investors are hoping the U.S. government's plans will boost confidence and turn the economy around," Shum said. "But it is premature to say the oil market or oil demand has turned the corner. Inventory remain high in many locations and there is still a supply overhang in the oil market. Oil prices still remain vulnerable." 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. Wall Street rallied on the news, with the Dow Jones industrial average rising nearly 7 percent. Asian markets continued to rally Tuesday. Better-than-expected U.S. housing news on Monday also supported oil prices. 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. Shum said traders will continue to look for signs of improvement in oil demand. Clear indications could come during the summer driving season in late May in the U.S., the world's largest energy consumer, on whether demand has picked up, he added. In other Nymex trading, gasoline for April delivery fell 0.3 cents to $1.4850 a gallon, while heating oil dipped also 0.3 cents to $1.4674 a gallon. But natural gas for April delivery gained 1.8 cents to $4.312 per 1,000 cubic feet. In London, Brent prices fell 35 cents to $53.12 on the ICE Futures exchange.
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