Thursday, June 4, 2009

Oil rises above $67, Goldman ups forecasts

Oil rose above $67 a barrel on Thursday after a 3.5 percent decline the previous day, boosted by increased oil price forecasts from U.S. investment bank Goldman Sachs.

U.S. crude for July delivery rose $1.19 cents to $67.31 a barrel by 0945 GMT. London Brent crude
Further support for oil prices came from higher European equity markets and a weaker U.S. dollar on Thursday.

Much of oil's rally this year has tracked stock market gains as investors look to equity markets for signs of economic recovery, while a weaker dollar can boost the appeal of oil and other commodities as a hedge against inflation.

''Equity markets are performing well, the dollar is falling, add to that Goldman Sachs and you see why oil has risen,'' said Simon Wardell, oil analyst at Global Insight.

Goldman Sachs raised its end of 2009 oil price forecast to $85 a barrel from $65 and introduced a new end of 2010 forecast of $95.

''The recent rally in WTI (U.S. crude) prices is likely to be but the first stage in the oil price rally that we expect will accompany a recovery in economic activity,'' Goldman said in a research note.

Oil closed down more than $2 on Wednesday following a report by the U.S. Energy Information Administration that U.S. crude inventories rose 2.9 million barrels, against expectations for a decline of 1.4 million barrels in a Reuters poll.

Saudi Oil Minister Ali al-Naimi has said producer group OPEC would wait until crude inventories fall to around 53 days of forward cover before considering raising output, nearly 10 days below current levels.

Markets are watching for decisions later in the day by the European Central Bank and the Bank of England, which are expected to keep interest rates on hold at record lows.

The latest signal on the state of the U.S. economy will come from employment data due on Friday.

U.S. non-farm payroll jobs likely fell by 520,000 jobs last month, the smallest number in seven months, a Reuters poll showed, but economists expect the U.S. unemployment rate to rise to 9.2 percent in May, the highest since September 1983.

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