LONDON, (Reuters) – Oil rose above $90 a barrel on Friday, building on gains from the previous session after U.S. lawmakers confirmed an economic stimulus plan to dampen fears of a recession in the world’s top energy consumer.
U.S. crude rose 93 cents to $90.34 a barrel by 0912 GMT, after jumping nearly 3 percent in the previous session to $89.41 a barrel. London Brent crude was $1.08 higher at $90.15 a barrel.
On Thursday, U.S. congressional leaders and the White House confirmed a $150 billion stimulus package of tax rebates for families, as well as incentives for business investment aimed at bolstering the battered economy. This followed the surprise move earlier this week by the U.S. Federal Reserve to slash interest rates by 75 basis points. Many in the market expect it to cut rates further next week.
Thursday’s stimulus plan led to a strong rally in global stock indexes, giving oil a boost despite mildly bearish U.S. weekly inventory data which showed that domestic crude supplies rose 2.3 million barrels last week, slightly above analyst expectations.
U.S. gasoline stocks swelled by 5 million barrels, well above forecasts, while distillates slipped 1.3 million barrels, the EIA said. “Equity markets… staged impressive recoveries yesterday dragging energy prices in their wake. In reality I saw nothing bullish in the energy sector,” said Robert Laughlin at MF Global, adding that there were doubts if the stimulus package would work. “Where things could go wrong here is that these monies will be wasted servicing existing debt.”
Growing fears the subprime mortgage crisis could tip the United States into a recession and depress oil demand growth have sent prices plunging from peaks above $100 a barrel in early January.
Analysts said funds and speculators had been closing out their positions in oil and commodities to cover margin calls and to finance losses in equity markets, contributing to losses earlier in the week.
The International Energy Agency’s executive director expressed concern about the strength of the world economy and said oil producers could help the situation by pumping more.
Iraq’s oil minister on Thursday said oil markets were well supplied, adding he did not think that OPEC will need to adjust production levels, echoing earlier signals from other members of the exporters’ group this week.
The Organization of the Petroleum Exporting Countries will meet on Feb. 1 to set production policy. Many analysts believe it will hold back from raising output.
Meanwhile, China’s apparent oil demand surged 6.4 percent in December, the highest growth rate in seven months. The world’s number-two oil consumer guzzled 7.20 million barrels of oil a day last month, well above the 2007 average of 6.93 million barrels per day, Reuters calculations from official data showed.