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Oil stays above $68 as investors eye inflation.
Posted on: 02-06-2009 , 04:: | DY365 Bureau

expectations that a massive global fiscal stimulus could spark an economic recovery and inflation.

Benchmark crude for July delivery was down 25 cents to USD 68.33 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose USD 2.27 to settle at USD 68.58.

Investors have been buying commodities, traditionally seen as a hedge against inflation, on worries that this year's huge fiscal and monetary easing around the world could eventually send prices soaring.

"There's a lot of concern about inflation, even talk about hyper-inflation down the road," said Christoffer Moltke-Leth, head of sale trading for Saxo Capital Markets in Singapore. "Oil right now is a freight train barreling upward."

Traders have also been investing in oil on signs the worst of a severe recession in the US is over, and that growth may be picking up in China.

"It looks like the market expects the turnaround is just around the corner," Moltke-Leth said. "But the economy is still deteriorating, just less than before."

Investors will be watching for the weekly petroleum inventory data from the Energy Department's Energy Information Administration on Wednesday for signs crude demand may be growing.

Analysts expect a fall of 2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Stocks dropped last week for a third straight week after rising for the previous 10 weeks.

In other Nymex trading, gasoline for June delivery was steady at USD 1.92 a gallon and heating oil fell 1.15 cents to USD 1.77 a gallon.

Natural gas for June delivery slid 6.5 cents to USD 4.18 per 1,000 cubic feet.

In London, Brent prices was down 6 cents to USD 67.91 a barrel on the ICE Futures exchange.

 
 

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