While you were sleeping: Oil surges, US jobless claims fall

Friday 5th June 2009

Crude oil surged more than 5% after figures showed US jobless claims fell for a third week and Goldman Sachs analysts forecast the price could reach US$85 a barrel by the end of this year and US$95 by the end of 2010.

Goldman analysts Jeffrey Currie and David Greely said a revival in economic growth and production cuts by OPEC will underpin the price of crude. “As the financial crisis eases, an energy shortage lies ahead,” they said in a report.

US crude for July delivery rose US$3.48 to US$69.60 a barrel on the New York Mercantile Exchange. Crude rebounded from a drop the previous day that was spurred by Energy Department figures showing inventories unexpectedly rose 2.9 million barrels to 366 million last week.

In a keynote address in Cairo, Egypt, US President Barack Obama said many states in the Middle East had “enjoyed great wealth as a consequence of oil”, but there was underinvestment in education and innovation. He pledged to seek “a broader engagement” with these nations and announced several initiatives to stoke economic development in the region.

Initial jobless claims fell by 4,000 to 621,000 last week, while the number of people getting unemployment insurance fell for the first time in five months, according to the US Labor Department said today. Non-farm payrolls data due on Friday in the US may show more than 500,000 jobs were eliminated last month while the unemployment rate climbed to 9.2%.

Stocks on Wall Street gained, with Exxon Mobil climbing 1.3% to US$72.98 and Chevron advancing 1.5% to US$69.79 as crude oil jumped.

The Dow Jones Industrial Average rose 0.9% to 8750.24 and the Standard & Poor’s 500 gained 1.2% to 942.46. The Nasdaq Composite rose 1.3% to 1850.02.

Lenders rose after RBC Capital Markets said banks are likely to outperform the broader market for some years. JPMorgan Chase climbed 4% to US$35.35 after Citigroup analysts raised their price target for the firm.

Bank of America rise 5.9% to US$11.87 and Citigroup climbed 5.3% to US$3.57.

Aluminium producer Alcoa Inc. rose 6.2% to US$10.69, leading the Dow higher as the US jobless data helped spur gains in metals.

Retailers fell after figures showed sales at stores open at least 12 months fell a greater-than-expected 9.1%. Abercrombie & Fitch slipped 12% to US$27.95, leading decliners on the S&P 500. Gap Inc. dropped 7.1% to US$16.94 and Macy’s fell 3.3% to US$12.88.

Stocks on Wall Street may end their rally as the Chicago Board Options Exchange Volatility Index, or VIX, held above 30, having climbed the past two weeks, indicating the cost of using options to insure against declines in the S&P 500 has risen.

Copper rose after the jobless claims data, bringing its surge this year to 63%. Copper futures for July delivery climbed 4% to US$2.301 a pound on the New York Mercantile Exchange.

Gold prices gained as a weakening US dollar spurred demand for the precious metal as an alternative investment.

Gold futures for August delivery rose 1.5% to US$980.20 an ounce on the New York Mercantile Exchange.

Venezuela progressed legislation effectively nationalising chemical factories in the South American nation by requiring their mainly foreign owners to become minority partners in joint ventures with the state. The law passed its first reading and will be debated next week.

President Hugo Chavez forced oil companies down a similar path.

The euro rose against the yen and the greenback after European Central Bank kept its key interest rate unchanged at 1% and President Jean-Claude Trichet said the worst of the euro-region’s recession has passed and the ECB doesn’t plan to cut interest rates again anytime soon or increase its asset-purchase programme.

“After a stabilisation phase, positive quarterly growth rates are expected by mid-2010,” Trichet told journalists in Frankfurt.

The Bank of England also kept its benchmark rate unchanged.

The euro climbed to137.15 yen from 135.93 and strengthened to $1.4171 from $1.4162 yesterday after falling as low as $1.4071 earlier. The greenback rose to 96.75 yen from 95.99.

The London Interbank Offered Rate, or Libor, for three-month loans in dollars slipped 1 basis point to 0.63%.

Stocks in Europe fell. The Dow Jones Stoxx 600 Index declined 0.2% to 209.47. Rio Tinto dropped 6.6% amid reports the mining company plans to raise as much as US$15 billion in the sale of shares.

The FTSE 100 edged up 0.1% to 4386.96 after a report from Lloyds Banking Group’s Halifax unit showed UK house prices unexpectedly rose 2.6% in May.

Germany’s DAX 30 rose 0.2% to 5064.80 and France’s CAC 40 rose 0.1% to 3312.03.

Businesswire.co.nz

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