Oil rises to near $49 as stock rallies boost hopes

SINGAPORE: Oil rose to nearly $49 a barrel on Thursday in Asia, brushing off news of increasing US crude supplies, as traders took heart from rallies in global stock markets as an indication of overall investor optimism.

But others cautioned that oil prices wouldn't go much higher because the outlook for the global economy remains murky.

Benchmark crude for April delivery rose 71 cents to $48.85 a barrel by midday in Singapore on the New York Mercantile Exchange. Prices rose fell $1.02 on Wednesday to settle at $48.14.

Wall Street advanced Wednesday for the sixth time in seven days, buoyed by news the US Federal Reserve plans to buy $1.25 trillion of government bonds and mortgage-backed securities. The purchases are designed to help revive the housing market and drive down borrowing costs for everything from mortgages to credit cards.

Since the rally began last week, the Dow Jones industrial average has jumped 14.4 per cent. Asian stock markets, which have also risen steadily since last week, were mixed Thursday.

Still, some analysts doubt oil demand from developed countries, which is still reeling from a financial crisis and severe recession, can justify sustained trading above $50 a barrel.

"There is still plenty of uncertainty about the US economy," said Gerard Burg, minerals and energy economist with National Australia Bank in Melbourne. "Demand remains broadly weak. It's likely we'll see a pull back."

Oil is up despite signs that US crude supplies are rising. The Energy Information Agency reported crude inventories rose 1.94 million barrels for the week ended March 13. The 353.3 million barrels of crude is the highest reported level in US inventories since June 29, 2007.

Gasoline stocks surged by 3.2 million barrels, surprising analysts who had expected a draw down of 2.1 million barrels.

"We've seen a steady increase in US oil inventories for the last six months," Burg said. "There's very little on the supply side to indicate a push higher in prices."

In other Nymex trading, gasoline for April delivery rose 1.73 cents to $1.38 a gallon, while heating oil gained 2.64 cents to $1.29 a gallon. Natural gas for April delivery was steady at $3.69 per 1,000 cubic feet.

In London, Brent prices rose 94 cents to $48.60 on the ICE Futures exchange.