Up with equities: Oil flirts with $54.
Oil trades around $54 on market rally
Oil prices briefly topped $54 a barrel today, getting a boost from stock investors who seemed hopeful a new plan to resolve America's banking crisis would spur economic growth.
Benchmark crude for May delivery rose $1.73 to settle at $53.80 a barrel on the New York Mercantile Exchange, continuing its upward momentum. Prices climbed as high as $54.05.
On Friday, oil ended the week above $50 a barrel for the first time this year, and prices have risen more than 30% this month.
Natural gas for April delivery rose 6.7 cents to settle at $4.294 per 1,000 cubic feet.
In London, Brent prices rose $2.25 to settle at $53.47 on the ICE Futures exchange.
"Generally, we've had moderately good economic news of late," said Michael Lynch, president of Strategic Energy & Economic Research. "That's giving people some optimism that maybe demand will be picking up. If the (new banking) plan is effective, so much the better."
The Obama administration's latest initiative to revive consumer and business lending, introduced today by Treasury Secretary Timothy Geithner, seeks to combine government and private resources to purchase an initial half-trillion dollars of bad assets off the balance sheets of banks. Eventually, the plan could grow to $1 trillion.
Also today, the National Association of Realtors said sales of existing homes rose from January to February. But the median sales price plunged to $165,400, down 15.5 percent from $195,800 a year earlier. That was the second-largest drop on record.
Wall Street reacted positively to the day's news, as the Dow Jones industrial average rose more than 4% in afternoon trading. Other leading U.S. market indicators also soared.
Stock market indexes closed mostly stronger in Asia and Europe.
Some, however, cautioned that oil’s advance may not be sustainable as global oil demand remains weak.
"Oil pricing is driven by the financial rally. It's questionable whether $50 is the new floor because the fundamental picture for oil has not changed. Demand remains weak in the near term and oil pricing may be vulnerable," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
Algeria's Energy Minister Chakib Khelil predicted yesterday that crude oil prices could hit $60 per barrel by the end of the year.
Bank of America Securities-Merrill Lynch has also raised its forecast for crude prices to $52 a barrel this year, from $50 a barrel, on the back of a tighter-than-expected oil market balance.