Oil prices rebounded on Thursday, after a late surge in US stock indices helped cool simmering fears of a recession in top energy consumer the United States. US stocks reversed a five-day slide on Wednesday, giving further boost to major Asian share markets on Thursday.
Buoyed by hopes that a government-backed plan to rescue ailing bond insurers was beginning to shape up, potentially staving off billions more in credit losses. US crude jumped 70 cents to $87.69 a barrel by 0745 GMT, after settling at a 13-week low of $86.99 a barrel in the previous session. London Brent crude rose 76 cents to $87.38 a barrel.
"The jump in oil is being driven by the late rally on US stock indices," said Jim Ritterbusch, president of Ritterbusch & Associates. Oil has lost more than $3 so far this week as bourses worldwide posted losses on widespread concerns that the US credit and housing crisis could trigger a recession and depress oil demand growth.
Analysts said funds and speculators had been closing out their positions in oil and commodities to cover margin calls and to finance losses in equity markets, which was now becoming the prime indicator of oil demand growth. "At least for the next few weeks, we will be putting inventory data and the weak dollar on the backburner," Ritterbusch said.
While US oil is down almost 13 percent from the all-time peak above $100 a barrel hit on January 3, prices remain up more than 60 percent from year-ago levels. Tight inventory levels, Opec production restraints and strong demand from investors seeking higher returns and a possible hedge against inflation supported oil on its surge.
On Wednesday Qatar's oil minister said Opec did not need to boost output when it meets on February 1 to determine production policy, and expressed concerns that demand could take a blow if a recession hit.
A Reuters poll of analysts forecast US weekly government oil inventory data to be released on Thursday would show a 2.2 million-barrel gain. Distillates stocks were forecast to show a 100,000-barrel draw, while gasoline stocks were expected to have risen by 1.4 million barrels.
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