Oil climbed towards $40 a barrel on Tuesday, partly reversing overnight losses, as some investors took positions ahead of the approval of a $800 billion-plus stimulus package by the US government as early as Tuesday. But doubts over whether a US bank rescue plan, to be revealed later in the day, would be enough to stem the global financial crisis weighed on sentiment, capping oil's gains.
US light crude for March delivery rose 53 cents to $40.09 a barrel by 0639 GMT. The contract settled down 61 cents at $39.56 a barrel on Monday. London Brent crude rose 52 cents to $46.54, maintaining a rare premium against US prices. "There isn't a lot of new information out there about the US stimulus package or bank rescue plan, so the gain is probably due to some investors taking positions ahead of those announcements," said Clarence Chu, a trader at Hudson Capital Energy in Singapore.
The US stimulus bill - a mixture of tax cuts and public spending measures - passed a key procedural hurdle in the US Senate on Monday, paving the way for the chamber to pass the bill on Tuesday. President Barack Obama said only the government could rescue the world's biggest economy from a "negative spiral", as investors around the globe looked to the United States to lead the way out of the global financial crisis.
But worries over the impact of the US stimulus package lingered. Dallas Federal Reserve President Bank Richard Fisher said on Monday that he did not expect the US economy to grow in 2009 and much hinged on the impact of the package that is being debated by the US congress.
On Monday, Opec Secretary-General Abdulla al-Badri reiterated the group's willingness to cut oil production further to steady prices at the group's next supply policy meeting on March 15 in Vienna, but Algerian energy minister Chakib Khelil said the cartel would be under less pressure to cut output if oil stabilised near the $40 a barrel level.
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