Perth - Oil rose 1.3% to above $50 a barrel on Monday, extending the previous session's gains, on hopes that producer group Opec might cut output again as early as this week to shore up prices that have tumbled to a 3½ year low.
Though Asian stocks cut losses and US stock futures rose after the US government said it had agreed to a $306bn rescue plan for embattled Citigroup, oil prices hardly budged on the news.
US light crude for January delivery rose 66c to $50.59 by 06:05 GMT, after rising as much as $1.41 soon after the start of electronic trading. The contract settled 51c higher at $49.93 a barrel on Friday, after dipping to a 3½ year low of $48.25.
London Brent crude rose 66c to $49.85.
"This is definitely a positive development. It may create a false rally in markets but the optimism probably won't last too long, since given the recent economic developments, it will need days or even weeks of positive news to boost oil prices at the fundamental level," said Mark Pervan, a senior strategist at Australia & New Zealand Bank in Melbourne.
"At the end of the day, the economic backdrop will need to significantly improve and the Citibank deal with the US government may be one of the first steps towards that."
All eyes on Obama
In a late-night announcement after a weekend of talks on a ways to help Citigroup, whose shares lost 20% of its value on Friday, the US Treasury Department also said it will invest $20bn in the beleaguered bank in exchange for preferred stocks and that the Federal Reserve was ready to backstop any additional risk in the asset pool.
The US dollar trimmed losses against the yen to ¥95.45 following the Citigroup announcement, but the dollar's trade-weighted index edged lower and fell against the euro and other currencies.
Oil's modest gains on Monday comes after a week of savage sell-offs, which saw prices tumble 13.6% - its biggest one-week drop in five weeks.
Analysts said the market will be eyeing Obama's announcement of his economic team later in the day, as he worked on a stimulus plan designed to lift the country out of its worst financial crisis in decades.
Oil has plummeted nearly $100 a barrel since its record high of over $147 in mid-July, with high prices earlier this year and the recent credit crisis denting demand in large consumer nations.
Emergency oil cut
Venezuelan oil minister Rafael Ramirez urged Opec on Sunday to agree to cut supply by 1 million barrels per day (bpd) at an emergency meeting in Cairo November 29 and make the cut take effect before the end of the year.
The comments were echoed by Iran's Opec governor, who said in remarks published on Monday that Opec needs to reduce output further.
The cut would be aimed at shoring up prices by creating a better balance between supply and demand on oil markets, but Opec President Chakib Khelil had said last week the cartel might not take any decision to cut output until its December meeting.
Opec agreed in October to cut output by 1.5 million barrels per day from November 1 but the move has failed to stem the decline in oil prices.
- Reuters