Oil Rises After Bush Stimulus Plan
AP Business Writer
Crude oil prices inched up Friday after three days of losses as investors struggled with concerns about the economy but held on to hopes that President Bush's stimulus plan will work.
Investors were keeping a close eye on the stock market, which also bounced between gains and losses. They wonder whether Bush's plan, which includes $145 billion worth of proposed tax relief, is enough to stave off a severe economic downturn.
Energy investors sometimes view stocks as a proxy for economic growth, so they were heartened earlier Friday when the Dow Jones industrials rose sharply, rebounding from Thursday's 306-point thrashing.
But dismal employment, housing and manufacturing data released in recent days remain fresh in the minds of traders who worry demand for oil and gas will fall. And the Conference Board said Friday its index of leading economic indicators slid 0.2 percent in December, more than the 0.1 percent decline analysts expected.
"The reason why there's a (stimulus) plan is because things are awful," said James Cordier, president of Liberty Trading Group in Tampa, Fla.
Light, sweet crude for February delivery rose 44 cents to settle at $90.57 a barrel on the New York Mercantile Exchange, but prices alternated frequently between gains and losses. Earlier Friday, futures rose above $91.
Concerns about the economy are balanced by a view that demand remains strong in the rest of the word, where economic growth does not appear to be slowing, Cordier said.
"Global demand ... is going to keep oil prices north of $85 (a barrel)," Cordier said.
Indeed, the International Energy Agency and the Energy Department both expect domestic demand for oil to slow this year while global demand remains strong.
But investors of all types are having a hard time persuading themselves to buy oil, or stocks.
"The psychology for the U.S. economy and the stock market is just terrible right now," Cordier said.
Many of the concerns about the economy center on high energy costs. Oil prices rose 58 percent last year, and hit a record price of $100.09 a barrel two weeks ago. At the pump, meanwhile, gas prices slid 1.1 cents overnight to a national average of $3.033 a gallon, according to AAA and the Oil Price Information Service, but are 82.4 cents, or 37 percent, higher than a year ago.
"What no one has yet come to grips with is the huge cost of higher energy prices," said Peter Beutel, president of the energy risk management firm Cameron Hanover, in a research note. "Americans have spent $1.3 trillion more on energy in the seven years from 2001 to 2007 than in the seven years ended December 31st, 2000."
Other energy futures were mixed Friday. February heating oil futures rose 0.39 cent to settle at $2.5074 a gallon on the Nymex and February gasoline futures rose 3.66 cents to $2.3034 a gallon. February natural gas fell 8.8 cents to settle at $7.993 per 1,000 cubic feet.
Brent crude for March delivery rose 48 cents to $89.23 a barrel on London's ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.
Copyright © 2008 The Seattle Times Company
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