Oil broke out of a week-long slump on Friday, soaring 10 percent, as traders prepared for a long Presidents Day weekend said.
Light, sweet crude for March delivery rose US$3.53 to settle at US$37.51 a barrel on the New York Mercantile Exchange. Prices rose as high as US$38.25 in afternoon trading.
In London, the March Brent contract rose US$0.16 to settle at US$44.81 on the ICE Futures exchange.
“It’s very simply profit-taking going into a three-day holiday,” Phil Flynn at Alaron Trading Corp said.
Traders had been selling the March contract all week and buying the April, May, June and July contracts, but that changed on Friday, he said.
After opening above US$42 a barrel on Monday, crude prices have tumbled every day as traders showed little optimism that a US$790 billion stimulus package and the Treasury Department’s plan to spend more than US$1 trillion to help remove banks’ soured assets from their books would perk up the economy — and oil consumption — anytime soon.
The House on Friday passed the stimulus package 246-183 with no Republican help.
The prospect of a deal did not help the struggling Dow Jones industrial average, which fell 82 points.
Prices on Thursday closed at their lowest level of the year at US$33.98 a barrel, and appeared headed back toward the January and February contract lows of US$32.48 and US$32.70 as oil inventories continue to soar during the worst recession since at least the 1980s.
The US Energy Information Administration said on Wednesday that crude inventories for the week ended Feb. 6 jumped 4.7 million barrels to 350.8 million barrels, surpassing analyst expectations and climbing toward levels last seen in the summer of 1990 when Iraq invaded Kuwait. US oil storage sites, including the main depot in Cushing, Oklahoma, are brimming with crude, reflecting the drop-off in demand.
“During the last week, we have had fresh estimates for oil demand which now forecast the biggest decline in consumption in more than a quarter of a century,” Peter Beutel of Cameron Hanover said in his Friday report.
“We have had a merciless unemployment report showing a decline in January of nearly 600,000 jobs, and we have had yet another increase in crude oil stocks, leaving inventories at their highest levels in 15 years, and creating the biggest surplus against the previous year since 1990. These factors have worked together to press crude prices right back against their spine of support,” he said.
Traders did not read much into Friday’s jump in price, noting that markets will be closed because of the holiday tomorrow.
“I think people are taking some money off the table,” oil analyst and trader Stephen Schork said.
Prices rose even as countries using the euro said the economy contracted by a record 1.5 percent in the fourth quarter and new car sales in Europe plummeted 27 percent last month from a year earlier to the lowest level in two decades.
Meanwhile, leaders of the world’s major industrialized countries were meeting in Rome on Friday to come up with ways to repair the global financial system.