Oil prices recoil after touching US$60

13-May-09

Light, sweet crude for June delivery rose to US60 per barrel before settling at US$58.8. Earlier in the day, oil prices rose to six-month highs, early signals of a recovery in global economy was offset by weak energy demand and record-high crude inventories in USA. Oil last settled above $60 on Nov. 10, and has mounted to the same levels as the dollar dips sharply vs the Euro and Yen. The price dip was triggered by concerns of weak backdrop for the oil market and short term lowering of crude oil outlook by the Energy Information Administration. As per the EIA, in 2009, world oil consumption has been revised by 1.8 mln bpd to 83.67 million. Crude supplies have risen to their highest levels since 1990 in USA, and analysts expect another 1.4 mln barrel expansion on release of EIA’s weekly inventory report mid week. Markets have found support in a report indicating a surge in Chinese investment spending in April, including a big advance in spending on transport. Interestingly, the report also showed a larger-than-expected drop in exports.