Oil steady at $61 after 2-day plunge

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(Agencies)
Updated: 2008-11-07 15:59

SINGAPORE – Oil prices were steady near $61 a barrel Friday in Asia, pausing after a two-day plunge, but vulnerable to another steep fall as evidence of a severe US recession continues to mount.

Light, sweet crude for December delivery was up 59 cents at $61.36 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. Oil prices overnight fell $4.53 to settle at $60.77 after dropping $5.23 the previous day.

"There's a lot of gloom and doom right now," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "Mounting bad news on the economic front is negatively affecting oil."

A slew of grim economic news Thursday led traders to dump oil on concerns over weakening demand for crude products, such as gasoline.

The number of Americans continuing to draw unemployment benefits surged to a 25-year high, the Labor Department said Thursday, and the US retailers saw their sales plummet last month to the weakest October level since at least 1969.

The bad news sparked a sell-off in equity markets as well. The Dow Jones industrial average fell 4.9 percent Thursday, and Asian markets followed suit Friday. Japan's benchmark Nikkei 225 stock average fell 0.4 percent.

"Oil continues to trade in lockstep with stock markets," said Shum. "More bad news could push oil into the $50s."

Oil prices have fallen nearly 60 percent since peaking at $147.27 a barrel in mid-July.

The dollar retreating after a sharp rally Thursday gave some support to oil prices in Asia. The dollar surged after the European Central Bank cut its key rate by half a percentage point to 3.25 percent, joining the Bank of England, Swiss and Czech central banks as they confront a looming recession.

Commodities such as oil are used as a hedge against inflation and a weak dollar. When a central bank cuts interest rates, it tends to weaken that nation's currency, meaning the dollar typically trades higher against it.

The euro gained to $1.2742 on Friday from 1.2681 on Thursday while the dollar was steady at 97.40 yen.

In other Nymex trading, gasoline futures rose 1.0 cent to $1.35 a gallon. Heating oil gained 1.86 cents to $1.96 a gallon while natural gas for December delivery fell 2.8 cents to $6.95 per 1,000 cubic feet.

In London, December Brent crude rose 41 cents to $57.84 on the ICE Futures exchange.