Oil up over $2 after US stock market surge
Singapore, October 29, 2008
Oil jumped as much as 6 percent on Wednesday, ending a three-day losing streak, after US stock indices staged their second-biggest point gain ever.
Asian stocks markets kept up the positive momentum, opening sharply higher on signals that the Bank of Japan might cut interest rates at a policy-setting meeting later this week, following an expected Federal Reserve cut later on Wednesday that should ease the flow of funds and help revive flagging economies.
US light crude for December delivery which earlier surged to a session high of $66.71, was up $2.32 at $65.05 a barrel by 0106 GMT. Prices had slumped by $5 over the past three sessions, settling on Tuesday at their lowest in 17 months.
London Brent crude rose $2.69 a barrel to $62.98.
"This gain is all equities related. The crude market was playing catch up," said US-based analyst Jim Ritterbusch of Ritterbusch & Associates in Galena, Illinois.
"Crude was able to shrug off a 200- to 300-point gain in the Dow but when it shot up 900-points-plus, it was just too hard to ignore," he said.
In a late-session rally after the normal session for US oil markets had shut, the Dow Jones industrial average and the S&P 500 both ended nearly 11 percent higher, helped by a late drop in the yen on hopes of a Japanese rate cut.
Oil and other commodities have tracked stock markets closely in recent months as investors divide the financial world into risky assets and safe havens, switching from one to the other amid volatile swings brought on by the worst financial crisis in 80 years.
"I don't think we've seen the end of fund liquidation. Also, there are a lot of bad economic indicators we are just starting to see. (US) unemployment is going to go up. There are all kinds of pressure points and various economic signals on the horizon," Antoine Halff, an analyst at Newedge Group, said.
Even an emergency Opec production cut -- and recent comments suggesting another one could be made before its December meeting -- has failed to revive oil prices, which have fallen by about 55 percent since their early July record high of above $147 a barrel. -Reuters