Oil Pares Losses

Oil recouped some of its losses on Monday to move back towards $89 a barrel, after suffering a sharp downturn the previous session, pressured by fears over a possible U.S. economic recession.
TradingEconomics.com, Reuters 2/4/2008 6:20:08 AM

U.S. light crude for March delivery was down 8 cents at $88.88 a barrel by 8:40 EST, after tumbling more than 3 percent on Friday. London Brent crude was up 6 cents at $89.50.

Mounting U.S. economic problems, including high energy costs, have prompted analysts to cut forecasts for oil demand growth.

Crude prices have fallen by more than 10 percent from the record $100.09 hit on January 3, but declines below $90 have been limited and oil has traded around the $90-a-barrel level for much of the past three weeks.

Earlier in the session, oil found some support from a rebound in world equity markets.

World stocks hit a 2-1/2 week high on Monday and emerging market assets also rallied as last week's news of major company deals eased concerns the credit crisis might be hurting corporate and economic activity.

Oil prices fell by nearly $3 on Friday after a government report showed U.S. employers cut 17,000 jobs in January, the first decline in 4-1/2 years and the latest signal all was not well in the world's biggest economy.

Crude speculators on the New York Mercantile Exchange last week trimmed net long positions -- or bets that the market would rise -- according to data from the Commodity Futures Trading Commission released on Friday. Net crude long positions fell to 29,845 in the week to January 29, the lowest level since mid-November.

Also on Friday, the Organization of the Petroleum Exporting Countries (OPEC) at a meeting in Vienna agreed to leave its output unchanged for now. But Gulf producer Kuwait said a supply rise would be discussed, while Iran and Venezuela suggested a cut might be in order when the group next meets in a month's time.