The price of oil jumped back above US$90 on Friday, boosted by renewed optimism that the flagging US economy, the world's biggest energy consumer, would be getting back on track.
New York's main contract, light sweet crude for delivery in March, rose US$1.30 to close at US$90.71 per barrel. In London, Brent North Sea crude for March gained US$1.83 to settle at US$90.90.
"As perception swings wildly, a more optimistic view on the US economy is the flavor of the moment," said John Kilduff, an analyst at MF Global. "Renewed optimism is gathering from news that a bailout for mortgage insurers is close to adoption, as is an economic stimulus package."
Despite recent gains, oil prices are still well off their early January historic highs of US$100.09 for New York's light sweet crude and US$98.50 for Brent.
Oil prices on Thursday had rebounded sharply as global stock markets firmed, China revealed strong growth numbers, and expectations OPEC will not increase crude output next week, traders said.
A US$150 billion economic stimulus plan unveiled on Thursday by US President George W. Bush and Congressional leaders to ward off recession, two days after a bold interest rate cut by the Federal Reserve, also raised spirits.
"Crude ... was slightly bearish but not bearish enough to offset the good feelings from a rebounding stock market after getting hit with the defibrillator paddles time and time again with economic stimulation. The question is whether or not the patient needed it," Phil Flynn at Alaron Trading said.
Flynn said the Wall Street Journal reported that Fed Chairman Ben Bernanke and his policymakers may have overreacted.
"They say criticism is mounting that Mr Bernanke overreacted to the market sell-off and might have been tricked into cutting rates because of the rogue trading scandal at Societe Generale in France," Flynn said.
Oil prices have slid from their record heights owing to fears that a US recession would severely dampen demand for crude.
Supply concerns meanwhile eased as the US Department of Energy announced on Thursday that US crude inventories had risen by 2.3 million barrels in the week to Jan. 18.
Analysts had forecast a gain of 1.5 million barrels.
Elsewhere the oil market was looking ahead to next Friday's meeting of the OPEC oil-producing cartel in Vienna. Analysts expect OPEC to resist calls from oil consumers to increase output to help to bring down prices.
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