Oil rises above $69, buoyed by US jobs data

U.S. crude futures rose above $69 a barrel on Friday, but traded below seven-month highs hit in the previous session, drawing strength from positive U.S.

jobs data, a rally in stock markets and a weaker dollar.

The oil market added to gains of 4 percent in the previous session on rising hopes for a recovery in oil demand following data showing the number of U.S. workers filing new claims for jobless benefits fell for a third straight week.

''The market is pricing in improved macroeconomic conditions,'' said Yingxi Yu, an analyst at Barclays Capital in Singapore.

U.S. crude for July delivery was trading 63 cents higher at $69.44 a barrel by 0524 GMT after peaking at $69.52.

The market hit $69.60 a barrel a day earlier -- its highest level since early November. London Brent gained 51 cents to $69.22.

But the market is still trading 53 percent below the record high of more than $147 it hit in mid-July last year.

U.S. investment bank Goldman Sachs said on Thursday a potential economic rebound alongside production cuts by the OPEC cartel could propel crude to $85 a barrel by the end of the year and to $95 a barrel by the end of 2010. [ID:nL4422610] OPEC seaborne oil exports, excluding Angola and Ecuador, will rise 250,000 barrels per day (bpd) in the four weeks to June 20, said an analyst who tracks future shipments.

[ID:nWLA5900] Supply unease may also be fed by news that Venezuela is readying to nationalise petrochemical projects as it steps up a drive to put key industries in state hands.

Some analysts cautioned, however, that a staggering rebound in oil prices from lows near $30 a barrel this winter might be overdone, given continued soft demand and high stockpiles.

''The view is demand is not falling through a hole and OPEC will be able to defend prices on the downside. Therefore price are moving towards the floor explicitly stated by OPEC,'' Yu said.

''The Goldilocks range is $70-80 -- enough to encourage investment in new supply but not high enough to impact consuming countries too hard.'' The U.S. dollar inched down against a basket of major currencies on Friday, with investors shifting money to higher-yielding currencies from the safe-haven dollar on views the global recession is easing.

The dollar index, a gauge of the greenback's performance against a basket of six currencies, slipped 0.1 percent to 79.390 <.DXY>.

''Risk aversion moves are inevitable if something happens to dampen hopes, as people have been taking more risks recently,'' said Minoru Shioiri, a senior manager of FX trading at Mitsubishi UFJ Securities, referring to the dives in the dollar.

''But an overreaction in the market is also unlikely as players are not taking as risky positions as they did a year ago.'' REUTERS SG KP1220

Oil rises towards $68 after U.S. jobs data

Oil rose towards $68 a barrel on Thursday after U.S. unemployment data showed a fall in jobless claims, raising expectations of economic recovery and increased demand for oil.

Oil was also supported by forecasts of higher oil prices from U.S. investment bank Goldman Sachs
U.S. crude for July delivery rose $1.61 cents to $67.73 a barrel by 1251 GMT, off an earlier high of $67.90. London Brent crude gained $1.92 to $67.80.

The number of U.S. workers filing new claims for jobless benefits fell for a third straight week, government data showed on Thursday, indicating some loss of force in the pace of the labor market's deterioration.

U.S. stock market index futures rose after the release of the data.

Earlier oil had rallied after 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.

''For the better or for the worse, a switch in the Goldman price forecast rarely does not have a price influence and we will need to take it as a market input for the next few days,'' said Petromatrix analyst Olivier Jakob.

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 the 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.

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.

Oil falls below $41 as downbeat data weigh

Oil fell below $41 a barrel on Friday, reversing some of the previous day's gains as the focus turned from a stock market rally to bleak economic news.

U.S. non-farm payrolls numbers due later on Friday are likely to add to the gloom, after data the previous day showed applications for U.S. jobless benefits soared to a 26-year high and German manufacturing suffered its biggest decline since 1990.

U.S. light crude for March delivery fell 43 cents to $40.74 a barrel at 0152 GMT, while London Brent crude, which usually trades below its U.S. counterpart, fell 15 cents to $46.31 a barrel.

A steep contango, with the April NYMEX contract $4.86 more expensive than March barrels, is encouraging traders to buy crude now for storage and sale at a later date.

Oil has shed more than $100 from its July peak near $150 a barrel as the global financial crisis triggered recessions in all of the big industrialised economies and sharp slowdowns elsewhere, cutting demand.

Inventories in the world's top consumer, the United States, have swelled.

''The relationship between NYMEX and Brent is still being distorted by the inventory situation in the United States,'' said David Moore, commodity strategist at Commonwealth Bank of Australia.

''Tonight's (payrolls) data may affect the perception of the U.S. economy and may give the market new direction,'' he added.

U.S. non-farm payrolls, due out later in the session, are estimated to have shed more than half a million jobs in January after losing a similar number in December.

Signals from producer group the Organization of the Petroleum Exporting Countries that it may cut output further to help bolster the market have supported prices this week.

The cartel may cut more oil output at a meeting next month, and one OPEC source said a reduction of 1 million barrels per day may be discussed.

U.S. Democrats in the Senate on Thursday pushed towards passage of a huge economic stimulus package despite scant Republican support, hoping to boost the U.S. economy, which could help stem a decline in fuel demand.

Territorial Army deployed to deal with oil strike

With the strike by employees of public sector oil companies crippling oil supply across the country, the Territorial Army Friday deployed three battalions at the Hazira terminal in Gujarat, Palam airport in Delhi and the Nawashava port in Mumbai.

"On the request of the petroleum ministry, three battalions (nearly 3,000 men) of the Territorial Army were deployed at Hazira, Palam and Nawashava for assisting in non-technical jobs," a senior defence ministry official said.

The Oil Sector Officers Association, an umbrella organisation of 45,000 employees, is demanding higher wages in 14 public sector undertakings.

"At Palam airport they are fuelling the aircraft. Four hundred flights took off after fuelling by them. At most airports, there is a problem for loading and offloading fuel and the Territorial Army personnel are assisting in it," an officer said.

"The personnel are also helping in oil production in Hazira," he said.

India cuts petrol, diesel prices; Petrol Rs. 5 down

India Friday allowed its state-run fuel retailers to cut prices of gasoline and diesel for the first time in 22 months to give a boost to its slowing economy, with cushion coming from the $100 per barrel drop in global crude oil prices.

Companies like Indian Oil Corp were allowed to cut their prices by Rs.5 a litre on gasoline and Rs.2 a litre on diesel. The prices of cooking gas distributed to households under a subsidised system were, however, kept unchanged.

“We are reducing the prices with effect from midnight,” Petroleum Minister Murli Deora told reporters after it was cleared at a meeting chaired by Prime Minister Manmohan Singh.

Indo-Asian News Service

High oil prices could hit India's growth

India's hopes of reaching a 10 percent growth rate on a sustained basis may be dashed if oil prices continue to rule at over $100 per barrel. Even the Planning Commission in its approach to the Eleventh Five Year Plan has estimated that high oil prices could affect the growth rate by up to 0.5 percent.
If this assessment, clearly a conservative one, is correct then the country will find it difficult to continue on a high growth path for the next few years. As of now, there is no indication that oil prices will climb down from their present Himalayan heights. In fact, Goldman Sachs has even made a projection that prices could reach up to $200 per barrel. In such a scenario, emerging economies like India and China that are among the largest oil consumers are going to be hard hit.
India's oil consumption may not be as high as that of China but it is among the top 10 oil consuming countries in the world. Officials of the Organisation of Petroleum Exporting Countries (OPEC), the cartel that controls about 40 percent of the global oil supplies, have recently said that the demand for oil is no longer largely from OECD countries. They contend the market is now dependent on consumption by India and China rather than the US economy, which has also been battered by high oil prices. OPEC is clearly in no mood to raise production, which could help to stem the continuing rise in crude oil prices. The oil cartel is actually arguing that by retaining the existing status quo on production quotas, it has helped stabilise the international oil market.

In view of the grim outlook on the oil front, it is time for the UPA government to adopt an appropriate strategy to deal with the fallout of a huge oil import bill. Estimates are oil imports will cost over $50 billion in the current fiscal. For the time being India has sufficient foreign exchange reserves to finance these imports. But the increasingly high cost of imports will put pressure on the trade deficit which is enlarging at a rapid rate despite the fact that exports are growing at healthy double-digit levels. Inflationary pressures on the economy are also mounting despite the fact that the entire increase in global prices has not been passed on to the domestic consumer. Though there has only been partial pass-on of fuel prices, inflation has risen to 6.7 percent, creating concern in the government with a slew of measures being announced recently to curb further price rise. In case world prices continue to rise over the next year, as has been predicted by some analysts, the pass-on may have to be largr despite political compulsions of the forthcoming general election.

The impact is already being felt in some sectors of the economy like aviation. Domestic air carriers have announced a hike in fares to cope with the increased prices of aviation turbine fuel. This in turn will affect the booming travel and tourism industry. And this is not the only industry that will be affected by higher fuel prices. The impact will be felt across the board by industry, leading to increased production costs and ultimately higher retail prices. In case this converts into a fall in demand, there could be an impact on the overall growth rate of the manufacturing sector, which has been a major contributor so far to the high GDP growth.

The soaring oil prices could not have come at a worse time for the present government. At a time when it is gearing up to face the polls, due to be held in 2009, it would prefer to be seen as a pro-poor administration handing out largesse like the loan waiver for debt-ridden farmers in the budget. The skyrocketing world oil prices are instead putting pressure on the government to take the unpopular step of raising fuel prices. A small price hike has already been announced for transportation fuels, but this is literally a drop in the ocean for domestic oil companies given the record levels to which crude oil has climbed in world markets. For the time being, the crisis has been averted by increasing the amount of oil bonds being given to the oil companies, but this is an accounting exercise for which the exchequer will pay dearly in coming years. Apparently, it was left to Petroleum Minister Murli Deora to point this out to Prime Minister Manmohan Singh at a recent meeting to discuss the cut in customs duty on rude.

The high world oil price scenario has to be dealt with by the government by adopting a strategy to diversify the country's fuel supplies. This would include finalising plans for a gas pipeline from some neighbouring countries. With the Iran pipeline sputtering toward closure, prospects can be explored for one from Central Asian countries. Similarly, the share of nuclear energy needs to be enlarged in the overall energy pie, along with other non-conventional energy sources like solar and wind energy. And, finally, the drive to find new oil by exploration in many prospective regions of the country needs to be intensified by involving the world's oil majors. In fact, high oil prices usually give an impetus to exploration activity because at these levels, the high risk task of finding oil becomes a more viable activity. A more serious drive needs to be undertaken to find oil because studies by the Directorate General of Hydrocarbons (DGH) indicate the country has several highly prospective basins, in both on she and onland areas.

In any case, it is clear that the spurt in global oil prices is not a short-term phenomenon. The world will have to live with high oil prices for quite some time to come. And India, like other emerging economies, will have to evolve a way in which to deal with this new world order in the energy arena.