Monday, May 11, 2009

>Crude near '09 highs on economy recovery theme

London - Crude oil futures traded near 2009 highs Tuesday during ongoing optimism over the outlook for the economy, before drifting lower on nervousness over fundamental support for a break higher.

Nymex crude topped out at USD54.60 a barrel Tuesday, just shy of the USD54.66 a barrel mark set in March, representing crude's highest traded level of 2009.

While expectations of more stockpile builds in U.S. inventory data, due Tuesday, proved a deterrent to a test of the highs, strength in equity markets retained the potential to push crude through them, analysts said.

"Sentiment in stock markets appears to be improving and that's been helping the market again," said Ole Hansen, manager of futures and fixed income trading at Saxo Bank in Copenhagen. "We're heading into storage numbers but, despite the high numbers we've seen recently, the market has been ignoring them. The market wants to hang onto the recovery theme and it's difficult to go against it."

At 1122 GMT, the front-month June Brent contract on London's ICE futures exchange was down 10 cents at USD54.48 a barrel.

The front-month June light, sweet, crude contract on the New York Mercantile Exchange was trading 22 cents lower at USD54.25 a barrel.

The ICE's gasoil contract for May delivery was up USD5.50 at USD455.25 a metric ton, while Nymex gasoline for June delivery was down 2 points at 158.58 cents a gallon.

Macro data Monday bolstered optimism that the worst of the global economic decline may now be in the past, which, along with firmer equity markets, has hinted at a more positive outlook for crude demand.

A rise in China's purchasing managers index above 50 for the first time in nine months, as well as a 3.2% increase in U.S. pending house sales, were among the latest "green shoots" to help nurture hopes for the global economic outlook.

Nymex crude settled Monday at a fresh 2009 high as U.S. share markets surged on U.S. macro data.

"With the outlook for risky and pro-growth assets continuing to improve (particularly as U.S. equity markets turn positive for the year), we are growing more constructive on energy markets," said technical analysts at Barclays Capital.

Weekly U.S. inventory data due later Tuesday and Wednesday, expected to reveal further builds in crude stockpiles, nonetheless stoked some nervousness over whether crude has sufficient support to push higher Tuesday, despite previous bearish data failing to weigh on prices.

The American Petroleum Institute is set to release weekly U.S. inventory data at 2030GMT Tuesday, a precursor to weekly data from the U.S. Energy Information Administration Wednesday. The EIA is expected to report a 2 million-barrel increase in the country's crude stockpiles in the week to May 1, according to the average prediction from seven analysts polled by Dow Jones Newswires.

Gasoline stockpiles may have built by 500,000 barrels and distillates, including heating oil and diesel, by 1 million barrels, the survey showed.

"The fundamental picture still remains a weak link," said David Hart, oil and gas analyst at Hanson Westhouse in London. "That said, expectations for another (U.S.) inventory build this week are already priced into the market, suggesting these factors are less of a concern for investors at the moment."