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07 Apr 2008 10:07
Oil prices rose on Monday in Asia as prospects for further cuts in United States interest rates seemed more likely after poor US jobs data at the end of last week.
The US Labour Department said on Friday that employers cut payrolls by 80 000 jobs last month, many more than analysts had expected. The news that the US unemployment rate rose to 5,1% is consistent with forecasts that the US is experiencing a sharp pullback in economic growth in the first half of the year.
“The dollar fell because investors figured that the US Federal Reserve would cut interest rates even further to help bolster the economy,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
The Fed has cut its key rates several times since the middle of last year in an effort to shore up the US economy against fallout from the subprime housing loan crisis.
Each reduction has pulled investors to oil, gold and other hard commodities as a hedge against inflation and a weakening currency.
“The falling dollar has been one of the key factors supporting oil prices in the past weeks,” Shum said.
Light, sweet crude for May delivery rose by 17 cents to $106,40 a barrel in Asian electronic trading on the New York Mercantile Exchange by mid-afternoon in Singapore.
While oil demand in the world’s largest energy consumer has slowed along with the US economy, oil prices have not.
Many analysts believe that is partly because weak economic data has hastened the decline of the dollar, whose weakness sustains the purchasing power of oil consumers using other currencies, and prods oil exporters to raise prices for the dollar-denominated commodity.
“The weakening fundamentals exert a lid on how high oil pricing can go, but the weak dollar continues to prop up oil pricing,” Shum said. “We have this tug of war going on ... I think that fundamentals will eventually prevail and pull back oil prices as you can defy the gravity of fundamentals only for so long.”
In other Nymex prices, heating oil futures rose by 1,55 cents to $3,0076 a gallon (3,8 litres), while gasoline futures added 0,51 cents to $2,7618 a gallon. Natural-gas futures rose by 13,1 cents to $9,453 per 1 000 cubic feet.
Brent crude futures fell eight cents to $104,82 a barrel on the ICE Futures exchange in London.—Sapa-AP
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