OIL prices rose back above US$50 (S$76.60) a barrel on Monday as investors gained confidence from reports that ailing US bank Citigroup will get a state bailout and that US President-elect Barack Obama has chosen an economic team to tackle what could be the worst slowdown in decades.
Iran: More Opec cuts needed
TEHERAN - IRAN believes the Organisation of Petroleum Exporting Countries (Opec) cartel should further slash output in the face of falling crude oil prices, a newspaper reported on Monday.
'Opec decided to cut production by 1.5 million barrels (a day) in October, but it could not stop oil prices from falling,' Iran's Opec envoy Mohammad Ali Khatbi was quoted a saying by the Resalat daily.
By mid-afternoon in Europe, light, sweet crude for January delivery was up US$1.17 to US$51.10 a barrel in electronic trading on the New York Mercantile Exchange. Trading was volatile with prices moving between US$48.80 and US$52.09. On Friday, the contract gained US$0.51 to settle at US$49.93.
In London, January Brent crude rose US$0.93 to US$50.12 on the ICE Futures exchange.
News that Mr Obama plans to name New York Federal Reserve Bank President Timothy Geithner as treasury secretary, Lawrence Summers as director of the National Economic Council and New Mexico Gov Bill Richardson as commerce secretary helped boost US stocks.
The Dow Jones industrial average rose 6.5 per cent on Friday but Asian markets on Monday were mostly lower with Hong Kong's Hang Seng index down 0.9 per cent and South Korea's Kospi down 3.4 per cent.
Oil futures have followed stock markets recently, using equities as a proxy for economic outlook and investor sentiment.
'The lack of clarity as to who exactly is in charge of steering the US economy is really hurting the equity markets,' said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. 'So putting together the new team gives a bit of a reassurance to the market, even if Obama isn't president yet.' Mr Obama will be sworn in on January 20.
Investors are also eyeing the impact of a government bailout of banking giant Citigroup, whose stock has plummeted on worries about its financial health. The Treasury Department said on Sunday it will take a $20 billion stake in the firm as well as guaranteeing hundreds of billions of dollars in risky assets.
'There's likely to be more bad economic news,' Mr Shum said.
'There isn't enough clarity in the global economic picture. Oil prices are still looking for a bottom.' The future of Ford Motor, Chrysler, and General Motors is also uncertain after Congress postponed debates on aid to the automakers.
Investors are looking for signs the Organisation of Petroleum Exporting Countries (Opec), which accounts for 40 per cent of global supply, may reduce output quotas. Venezuelan Oil Minister Rafael Ramirez said Sunday that Opec should cut oil production by 1 million barrels per day at an informal meeting Nov 29 meeting in Cairo.
The group, which cut output by 1.5 million barrels a day last month, will hold its next official meeting on Dec 17.
'It's still a big question mark whether Opec will make an additional cut at the Cairo meeting,' Mr Shum said. 'Chances are better for a cut at the December meeting. Talk of a cut is providing some support for prices.'
In other Nymex trading, gasoline futures rose US$1.22 to US$1.0765 a gallon. Heating oil was up almost a penny to US$1.709 a gallon while natural gas for December delivery jumped US$0.18 to US$6.66 per 1,000 cubic feet. -- AP
