Oil prices advance with US stock markets

26-Feb-09

Crude oil for April delivery stood at US$39.65 a barrel on the NYMEX, after the previous days’ rise to US$39.96 a barrel. Crude oil gained for the first time in 3 days along with advances in the US stock market. Thereafter, crude oil was little changed as this seemed like a short- term rally that does not alter the harsh economic reality. The Dow Jones Industrial Average increased 236.16 points (3.3%) to 7,350.94. The Standard & Poor’s 500 Index rose 29.81 points (4%) to 773.14. Oil prices could be expected to start rising in the second half of the year, as a drop in demand starts leveling off and OPEC cuts supply, according to a Barclays Capital report yesterday. The oil market’s “current phase will determine whether OPEC has merely succeeded in staunching the fall or whether prices will start to trend upwards, particularly in the second half of the year. The 11 OPEC members with quotas, all except Iraq, reduced output 3.8% to 25.3 mln bpd in February, down from 26.3 mln barrels in January, Currently, delivery to Asia is being affected, while supply to Europe and USA will take a little longer to get affected.