Monday, November 29, 1999

Oil up as rescue deal revives risk trade

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Oil prices rallied on Monday as a $1 trillion global emergency package to stabilize the euro boosted stock markets and commodities as investor risk appetite increased.The size of the package surprised market participants and boosted confidence that oil demand growth will continue, lifting crude prices in the first trading session after theirbiggest weekly loss since December, 2008."The risk trade has come back after traders last week ran for cover as the uncertainty about the (Greece) bailout plan kept traders on edge," Phil Flynn, analyst at PFGBest Research in Chicago said in a note.The rescue package consists of 440 billion euros in guarantees from euro area states, plus 60 billion euros in a European stabilization fund that could be disbursed to helpeuro zone states if needed. A further 250 billion euros would come from the International Monetary Fund.U.S. light crude oil futures for June delivery were up $1.58 at $76.69 a barrel at 12:23 p.m. EDT (1623 GMT) on Monday, after hitting an intraday high of $78.51, up $3.40. ICE Brent crude for June rose $1.83 to $80.10.Global equities markets and the euro rebounded and the dollar index slipped as news of the rescue package helped calm risk aversion.On Wall Street, major stock indexes surged more than 4 percent early, with the S&P 500 index racking up its best opening on record as the rescue package eased fears thatGreece's debt crisis would spread.OPEC Secretary-General Abdullah al-Badri said he expected the rescue package to boost oil prices back above $80 a barrel, but warned of wild price swings as the global economy continued on its path to recovery."I think the market will look positively at this development," Badri told reporters on the sidelines of the Arab Energy Conference. "I assume prices would go back to normal,where it was ... back up to $80 plus."Badri said on Sunday oil markets were oversupplied and urged better compliance with OPEC output targets agreed to in 2008, but said it was too early to talk about OPEC action to halt the price fall sparked by the euro zone debt crisis.Top exporter Saudi Arabia will maintain full volumes to its main Asian customers and keep supplies steady to at least one European major next month.China imported 21.17 million tonnes of crude oil or 5.15 million barrels per day in April, a record high level on a daily basis, according to customs department data. That was 31 percent higher than a year earlier, when imports were at 16.17 million tonnes.Price charts show U.S. crude temporarily supported at $74.51 and expected to rebound to $78 as the drop last week was too sharp not to be followed by a powerful rebound.U.S. crude futures started last week posting an $87.15 intraday peak on Monday that was the highest front-month crude price since $89.82 was struck on Oct. 9, 2008.Then four losing sessions left crude prices down $11.04, or 12.81 percent for the week, the biggest weekly percentage loss since the week to Dec. 19, 2008, when the percentage loss was 26.82 percent, according to Reuters data.High U.S. oil inventories, especially at the Cushing, Oklahoma, delivery point for U.S. benchmark crude oil, have kept front-month crude futures priced well below the next month. The spread was more than $3 on Monday .(Additional reporting by Gene Ramos in New York, Christopher Johnson in London, Alejandro Barbajosa in Tokyo; Editing by David Gregorio)
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