Oil rallies over $90

Oil prices bounced back to above $90 a barrel on Wednesday as unexpectedly big gains in US private sector jobs spurred optimism the economy was recovering at a faster pace. Wall Street and commodities markets latched on to the ADP Employer Services employment report, which showed the biggest rise in its data which goes back to 2000. Oil shook off early losses and turned positive after failing to drop below $88 a barrel.
Oil fell earlier in the day after suffering the biggest single-day drop since mid-November on Tuesday. Crude was initially led lower by a stronger dollar, which typically weighs on commodities as they become more expensive for buyers using other currencies.
Oil's rally back was led by London Brent crude, which was bolstered by a chemical plant fire at the Dutch Moerdijk industrial zone, which affected shipping traffic in the Europe's busy Rotterdam-Antwerp ports. The fire did not impact Royal Dutch Shell's oil refinery there.
ICE Brent February crude settled up $1.97 at $95.50 a barrel. NYMEX February crude ended up 92 cents at $90.30. Brent's premium to the US benchmark West Texas Intermediate surged above $5 a barrel, the highest in seven months. The Institute of Supply Management also reported that its gauge of the massive US services sector reached its highest level in more than four years.
"As equities rallied, the oil bulls that were on the sidelines came back and prices are bouncing back solidly," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. US oil prices have returned to above $90 after a profit-taking binge that slashed values to just above $89 on Tuesday. Crude ended 2010 at $91.38, 15 percent higher than a year ago.
At current levels, oil has risen to a "danger zone" that could harm the global economic recovery, according to a Financial Times interview with Fatih Birol, chief economist of the International Energy Agency, the West's energy watchdog based in Paris. "The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil consuming countries and to the oil producers," Birol told the FT.