Tuesday May 5, 12:55 PM
Oil prices fall after five-month spike
LONDON (AFP) - Oil prices fell slightly on Tuesday after rallying to the highest levels in more than five months thanks to rebounding stock markets rather than signs of recovery for energy demand, analysts said.
Brent North Sea crude for delivery in June fell 18 cents to 54.40 dollars a barrel, a day after hitting the highest points since last November.
New York's main futures contract, light sweet crude for June delivery dropped 14 cents to 54.33 dollars a barrel, after earlier Tuesday hitting 54.60 dollars -- the highest level since November 18.
"For now it is worth remembering the crude markets have been driven by external factors and if the present round of optimism is dented then the oil price could topple again," said Nimit Khamar, oil analyst at Sucden brokers in London.
"Until we see actual demand for crude increase... crude prices rising and holding above 60 dollars is an unlikely scenario."
World oil prices have slumped since striking record highs above 147 dollars in July 2008, when a global economic downturn sharply dented demand.
While prices have bounced back in recent weeks on early signs the worst may be over for the US economy, analysts have cautioned that the current global swine flu outbreak could set back any recovery.
However, recent data showing that manufacturing in China expanded for the first time in nine months in April should be supportive of oil prices as it means higher demand from the world's most populous nation, analysts said.
The CLSA China Purchasing Managers Index, or PMI, a closely watched indicator in the world's third-largest economy, rose sharply to 50.1 in April from 44.8 the previous month.
"The bullish leadership from the financial markets continues to have the upper hand in deciding the short term direction for crude," energy analysts at ODL Securities said in a note to clients published Tuesday.
On Monday, "in the absence of Tokyo and London closed for holiday, it was left to the Dow Jones (news) to provide guidance for the energy complex and consequently a sharp advance in the equities easily supported another rally in crude.
"A weakening in the US dollar was also a supportive catalyst.... Any potential decline in crude looks rather to be triggered by a sell off in stocks and/or a strengthening in the greenback," they added.
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