Oil rises above $82 as stock markets rebound
Oil prices rose above $82 a barrel Tuesday, regaining a little ground after the fraud case against Goldman Sachs and flight disruptions in Europe from volcanic ash triggered a two-day plunge.
By early afternoon in Europe, benchmark crude for May delivery was up $1.12 to $82.57 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, oil tumbled $1.79 to settle at $81.45 after falling $2.27 on Friday.
A rebound in stock markets helped boost crude prices. The Dow Jones industrial average rose 0.7 percent Monday as Citigroup Inc. reported better than expected earnings and revenue, and most Asian and European indexes gained Tuesday.
Stocks dropped Friday after the U.S. Securities and Exchange Commission said Goldman defrauded investors by failing to disclose key information about mortgage investments it sold as the housing market was collapsing in 2007. Offsetting at least temporarily the impact of the fraud claims, Goldman said Tuesday its first-quarter earnings almost doubled to $3.3 billion as its trading business again surpassed the rest of the financial industry.
Oil traders often look to equities as a barometer of overall investor sentiment.
"The stock market proved that lawsuits and courts are no match for profits," Cameron Hanover said in a report. "That took away one source of selling in oil."
Investors are also eyeing a huge cloud of ash from an Icelandic volcano that shut down air traffic in most of Europe for the past five days. Some cities, such as Barcelona and Rome, were beginning to receive flights Tuesday, but most European airports remained shut.
"We will continue to monitor the evolution of the unpronounceable volcano because any new air traffic interruption will put a downward risk on oil prices," said Olivier Jakob of Petromatrix in Switzerland.
Despite Tuesday's rebound, analysts repeated concerns about ample supplies and insufficient demand for crude and oil products.
"Crude's fundamental backdrop still remains uninspiring, with stock levels high and supply outpacing demand," said a report from Edward Meir, senior commodity analyst at MF Global in New York. "In addition, the commodity markets have to work against the headwind of a stronger dollar, which given the turmoil in Europe, will only intensify. So while we could see a blip higher short-term, we suspect the market is still vulnerable over the medium term."
A stronger dollar usually helps push down oil prices by making crude more expensive for investors holding other currencies, and vice versa.
In other Nymex trading in May contracts, heating oil rose 3.05 cents to $2.1873 a gallon and gasoline gained 2.02 cents to $2.2746 a gallon. Natural gas jumped 2.4 cents to $3.968 per 1,000 cubic feet.
In London, Brent crude's June contract was up 87 cents at $85.10 on the ICE futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this report.