Oil Rises on Stimulus Efforts, OPEC Production Cut Compliance

By Gavin Evans

April 6 (Bloomberg) -- Crude oil rose in New York on speculation global economic stimulus efforts and production cuts by the Organization of Petroleum Exporting Countries may slow growth in world stockpiles of the fuel.

Oil climbed above $53 a barrel as Group of 20 plans to spend $1 trillion to shore up the world economy prompted the dollar to drop for a third day, boosting the appeal of commodities priced in the U.S. currency. OPEC quota cuts imposed in December are being complied with and have helped stabilize prices, Algerian Oil Minister Chakib Khelil said yesterday.

“It’s a reflection of a more positive economic outlook,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “If we do see a bit more risk appetite return to the market, we should see the dollar come off a bit more and that would be a constructive factor for oil.”

Crude oil for May delivery rose as much as 78 cents, or 1.5 percent, to $53.29 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $53.02 at 7:45 a.m. in Singapore.

The contract fell 13 cents, or 0.3 percent, to $52.51 a barrel on April 3, after a report showed the U.S. jobless rate jumped to a 25-year high in March. Prices surged 8.8 percent the day before when the G20 announced its stimulus plan.

The dollar fell to a one-week low against a basket of currencies of its major trading partners today. It was at $1.3523 to the euro, from $1.3491 in New York late last week.

Brent, Equities

Brent crude oil for May settlement rose 23 cents, or 0.4 percent, to $53.70 on London’s ICE Futures Europe exchange. It climbed 72 cents, or 1.4 percent, to $53.47 a barrel on April 3.

New York oil futures have posted seven straight weekly gains, after falling to a four-year low of $32.40 a barrel on Dec. 19.

Prices rose last week as the dollar weakened and as world equity markets rallied on speculation the worst of the global recession may be over soon.

While OPEC has contained output, the recession will limit price gains and oil is likely to trade between $50 and $55 a barrel, Khelil told reporters yesterday.

“If equities continue to rally, it’s going to be pretty hard for oil to get knocked back down,” Commodity Warrants’ Hassall said. “If we start to approach $60 you would have to be asking some questions” given weak demand and high global stockpiles, he said.

Crude oil inventories in the U.S., the world’s largest energy-consuming nation, rose to 359.4 million barrels on March 27, a 15-year high. The International Energy Agency will likely lower its global demand forecast this week, given slowing world growth, Executive Director Nobuo Tanaka said April 2.

“I think OPEC would be fairly happy with where oil prices are now,” Hassall said.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net