Oil prices hover around US$54 as spending on housing suggest stabilizing of economy

05-May-09

Light, sweet crude for June delivery rose to US$54.4, triggered by increased investor confidence that the US economy is stabilizing on better-than-expected readings on pending home sales and construction spending. Pending home sales increased for the second month, spiking to 3.2% in March, according to the National Association of Realtors. As per another report, construction spending rose 0.3% in March, driven partly by a big increase in spending by state and local governments. These buoyant reports sent stocks up more than 2% on the Wall Street. However, crude stockpiles in USA are at their highest levels since 1990, while demand for oil is down nearly 11% to its lowest level since 1999. Impending results of the government's "bank stress tests" could dampen recent enthusiasm about a possible economic recovery. The tests, conducted on 19 of USA's biggest banks, will determine which are healthy enough to withstand another financial shock and which need to raise more capital.