Oil Prices Rise to Near $90 a Barrel

Oil futures rose Friday in Asia to extend a gain of more than $2 a barrel after U.S. leaders agreed to a stimulus plan in an effort to avert a major slowdown in the world's largest economy. Light, sweet crude for March delivery rose 39 cents to $89.80 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract gained $2.42 to settle at $89.41 a barrel in the floor session.

Prices were also boosted Thursday after the U.S. government reported a drop in heating oil supplies. But the overnight gains really accelerated -- with oil posting its largest rise in over three weeks on word that the Bush administration and Congressional leaders had reached an agreement on an economic stimulus package. Traders have bet that the tax rebates of $600 to $1,200 that are part of the package will boost oil demand.

Meanwhile, the weekly inventory report from the Energy Department's Energy Information Administration showed stocks of distillates, which include heating oil and diesel fuel, fell 1.3 million barrels last week. Analysts surveyed by Dow Jones Newswires had said, on average, distillate supplies would remain unchanged. That decline was countered by domestic gasoline inventories, which jumped 5 million barrels, more than triple the analysts' expectations. Crude inventories rose 2.3 million barrels, the EIA said, slightly more than expected.

Because the report was mixed, investors' attention has returned to the economy and rebounding global stock markets. Oil prices fell in recent days, following equity markets that dropped earlier this week on U.S. recession worries. But with the Federal Reserve's emergency cut in its key interest rate Tuesday, stock markets worldwide have been rebounding, although extreme volatility continues to mark trading.

On Friday in Asia, Japan's benchmark Nikkei index was up 2.9 percent in afternoon trading, while Hong Kong's Hang Seng had gained as much as 5.9 percent in its morning session. On Thursday, the Dow Jones industrial average gained more than 100 points for its second straight positive finish. Energy investors often view stocks as a proxy for economic growth, fearing that a slowdown would curtail demand for oil and petroleum products such as gasoline and heating oil.

In London, March Brent crude rose 33 cents to $89.40 a barrel on the ICE Futures exchange in London. Nymex heating oil futures rose 0.92 cent to $2.4855 a gallon while gasoline prices added 0.97 cent to $2.2925 a gallon. November natural gas futures rose 5.8 cents to $7.86 per 1,000 cubic feet.
Source: Google News