Oil traders watch Wall Street rally fail

Source: Agencies  |   2008-11-11  |     ONLINE EDITION

OIL prices fluctuated throughout the day yesterday, tracking closely with the path on Wall Street where an early rally failed to hold.

Light, sweet crude for December delivery rose US$1.37 to settle at US$62.41 a barrel on the New York Mercantile Exchange Monday, but swung as low as US$59.10 at one point.

In London, December Brent crude rose US$1.73 to settle at US$59.08 a barrel on the ICE Futures exchange.

The weakening in the US dollar, partially driven by the US$586 billion Chinese stimulus package, may be pushing investors to buy crude, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

"We still have this connection between the oil market, the equity markets and the currency markets," Ritterbusch said.

Crude is bought and sold in dollars, and when the dollar falls against foreign currencies, investors often sell the US currency and buy oil.

Oil prices are also experiencing some spillover from the equity markets, in which any significant rise "conjures up images of a softer economic landing," Ritterbusch said.

The Dow Jones industrial average was up more than 215 points earlier yesterday before reversing course to fall more than 150 points to the 8,777 level in late afternoon trading.

China's announcement lifted Asian stock markets, as the Shanghai Composite Index surged 7.3 percent, Japan's benchmark Nikkei 225 index rose 5.8 percent and Hong Kong's Hang Seng index gained 4.8 percent.

But crude prices fell in midday trading with US investors paying close attention to a failed rally on Wall Street.

"What we know about demand in China is pretty anecdotal ... we don't really know what's going on," said Ritterbusch. "But it feels like demand for oil has slipped much more than people anticipated. An economic stimulus package did not increase demand in the US, nor did it offer a lot of support to the stock market, which is what people are watching now."