Business | Investment

Oil rebounds as confidence returns

Oil rose nearly $3 (Dh11) to above $100 yesterday on expectations a comprehensive US government plan would help battered financial markets.

  • Reuters
  • Published: 00:24 September 20, 2008
  • Gulf News

London: Oil rose nearly $3 (Dh11) to above $100 yesterday on expectations a comprehensive US government plan would help battered financial markets.

The US government launched several multi-billion-dollar programmes to guarantee holdings in money-market mutual funds and curb short-selling while developing a broader plan to mop up toxic mortgage debt, sending global markets higher.

News of the plan helped push up US crude up $2.74 to $100.62 a barrel at 14.45 GMT, after touching a high of $103.64 earlier. Prices have rebounded from a seven-month low of $90.51 a barrel on Wednesday.

London Brent crude gained $2.34 to trade at $97.53.

"I think oil is up because there is more confidence in the financial markets. There is a feeling that the crisis is bottoming out and some may see it as a good time to buy," said Gerard Rigby, an independent energy consultant based in Sydney.

Flagging oil demand in the United States and other consumer nations, because of high fuel costs and the credit crisis, have sent crude tumbling from a record high of over $147, hit in July.

Investors who flocked to commodities as a hedge against inflation and the weak dollar have been pulling out of oil, putting additional pressure on prices. Continued concern over supply from the United States and Nigeria also supported crude.

"Traders will continue to alternate focus between the financial markets, which could result in further demand destruction, dollar movements as well as production out of the US Gulf of Mexico," said Gerard Burg, a Melbourne-based resource analyst.

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