OilVoice - Oil Rebounds After Decline

Oil Rebounds After Decline

Friday, April 04, 2008

Crude oil futures rebounded this Friday in Bangkok, Thailand. The futures fell by $1 last night but the dollar stabilized, encouraging investors to sell. Previously, investors had been buying crude as a hedge against inflation.

Oil prices have stayed above $100 a barrel for more than a month. This large increase in oil prices can be attributed to the general view of the public regarding crude, gold and other hard commodities. Most speculators believe that these commodities are effective hedges against a falling dollar and inflation.

Ever since the dollar became stable against the yen and euro, investors have been reluctant to invest money in oil for reasons that are not related to supply and demand.

The May delivery of light sweet crude rose by 29 cents to $104.12 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The Nymex crude contract finally settled $1 lower to $103.83 a barrel for the previous session.

According to analysts, there is a debate on prices. There are people who want to buy oil as a hedge against future decline in the dollar; however, others believe that there will be low demand for fuel and energy on a large scale due to slowing worldwide economies.

There was a gain of $4 in front-month crude futures contracts this Wednesday. This gain was due to reports showing a large fall in U.S. gasoline inventories. Ever since the reports, gasoline prices have been leading the market. The decline in gasoline inventories, took the market by surprise and there has been little interest in the 7.3 million barrels increase in crude oil stocks. Traders are also concentrating on low refinery utilization of 82.4 percent, this will lead to further shrinking of stock for motor fuel, for the peak summer driving season.

The inventory report of Wednesday suggests that’s gasoline demand still remains low, even after going little higher.

This week Federal Reserve Chairman Ben Bernanke forecasted weakening prospects of global economic growth, he further warned about the upcoming U.S. recession for the first time, on Wednesday. Some investors viewed his remarks indicative of further cuts in interest rate from the Fed. However, this is will most probably result in the decline of the dollar.

Traders will be closely watching the U.S non-farm payrolls number this Friday, to foresee direction of the oil market leading into next week. Report from the Labor Department showed that the large increase in the claims for the jobless benefit. So far, reports have shown the highest level of claims in the past two years, indicating a decline in payroll jobs for the third straight time.