Crude prices gained for the third day in a row on Friday, despite contracting global demand and a huge reserves position. Worries that the US bank bailout will induce a wave of inflation sent money flowing into hard assets like oil.
Benchmark crude for June delivery rose $1.93 to settle at $51.55 a barrel on the New York Mercantile Exchange. Brent crude added $1.56 to settle at $51.67 a barrel on the ICE Futures exchange in London.
Industry analysts claimed there was little reason for even small upward price movements, given the dismal of the world’s economy. The government reported this week that the US petroleum appetite is the lowest in a decade and oil inventories are the highest in nearly 19 years.
Equities markets also moved higher on Friday, which recently has propped up oil prices. Investors look to equities for signs that the economy is recovering, and they tend to pump money into commodities when the equities show an uptrend.
Two US power companies – American Electric Power and The Columbus – on Friday stated that demand for electricity had slowed down. The falling demand can also be seen in recent unemployment figures, with energy intense industries like manufacturing hit particularly hard.
This apart, the three major US automakers have slowed down production this year to match a plunge in demand.
Oil producers have been cutting crude exports in hopes of draining the global oil reserves and boosting prices.