The price of oil rose Monday, although last week’s sharp declines still loomed over the market.
Benchmark U.S. oil rose 75 cents to US$83.98 per barrel in New York. It fell $7.63, or 8.4 per cent, last week as gloomy economic data from the U.S., China and Europe raised questions about the strength of demand for oil and other energy-related products.
Monday’s gains followed support by the German chancellor for a European banking union. That pushed the euro higher against the dollar. A decline in the dollar makes oil cheaper for holders of foreign currency.
Still, the fundamentals aren’t in oil’s corner. The pace of hiring has tailed off in the U.S. Growth in China and India is slowing. And Europe is struggling simply to keep its economic bearings as leaders are unable to find a solution to its debt crisis. That all points to weaker demand, at least in the short term.
Most analysts don’t expect the price of oil to rise much without clear signs about where the global economy is headed and, in particular, how Europe will resolve the massive crisis that has kept the region in turmoil for months.
“You’ve got this pale over the market that is just kind of hanging in,” said oil trader Stephen Schork.
In the U.S, the Commerce Department on Monday reported that U.S. factory orders fell 0.6 per cent in April from March. It was the second straight month of declines. In addition, demand for products such as heavy machinery and computers dropped 2.1 per cent.
The disheartening economic headlines diminish the positive impact of falling gasoline prices. The national average for a gallon of gasoline fell to $3.585 over the weekend, according to AAA, Wright Express and the Oil Price Information Service. Gas hadn’t been below $3.60 since Feb. 22. It’s down 35 cents from its peak on April 6, making a fill-up for a minivan about $7 cheaper.
Brent crude, which is U.S. to price a variety of crudes imported by U.S. refineries, rose 42 cents to $98.85 in London. Brent fell 7.8 per cent last week.
Analyst Jim Ritterbusch said the signs of slower economic growth likely will lead to reduced forecasts for oil demand.
In other trading Monday, natural gas prices rose on forecasts for hot weather across much of the mid-section of the U.S. Accuweather.com projected above-normal temperatures over the next two weeks from Maine to North Dakota and into the Southwest. Natural gas rose 8.9 cents, or 3.8 per cent, to $2.415 per 1,000 cubic feet.
Heating oil was unchanged at $2.627 per gallon and gasoline futures rose 1.39 cent to $2.671 per gallon.
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