LONDON, (Reuters) – Oil rose to $90 a barrel on Friday, lifted by a broader stock market rally as the United States confirmed an economic stimulus plan to ward off a recession in the world’s top energy consumer.
U.S. crude rose 66 cents to $90.07 a barrel by 1140 GMT, off highs of $90.44 earlier in the session. It jumped nearly 3 percent on Thursday to settle at $89.41 a barrel.
London Brent crude was 86 cents higher at $89.93 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 economy. This followed the surprise U.S. Federal Reserve slash of interest rates by 75 basis points. Many in the market expect it to cut rates further next week.
Thursday’s stimulus plan pushed up 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. “Oil’s move up is in step with what’s happening in equity markets. Seems like there is a turn in the view that the year ahead isn’t going to be so bleak in terms of the U.S. economy and this has knock-on effect on oil,” said Global Insight analyst Simon Wardell. However, there were still some doubts as to whether the stimulus package would work. “Where things could go wrong here is that these monies will be wasted servicing existing debt,” said Robert Laughlin at MF Global.
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.
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.