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Oil prices rise above $50 on Obama economy team

(Agencies)
Updated: 2008-11-24 16:08

SINGAPORE – Oil prices rose above $50 a barrel Monday in Asia as investors gained some confidence from reports that US President-elect Barack Obama has chosen an economic team to tackle what could be the worst slowdown in decades.

Light, sweet crude for January delivery was up 37 cents to $50.30 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The January contract Friday rose 51 cents to settle at $49.93.

News that Obama plans to name New York Federal Reserve Bank President Timothy Geithner as treasury secretary, Lawrence Summers as director of the National Economic Council and New Mexico Gov. Bill Richardson as commerce secretary helped boost US stocks.

The Dow Jones industrial average rose 6.5 percent Friday but Asian markets on Monday were mostly lower with Hong Kong's Hang Seng index down 1.5 percent and South Korea's Kospi down 2.4 percent.

Oil futures have followed stock markets recently, using equities as a proxy for economic outlook and investor sentiment.

"The lack of clarity as to who exactly is in charge of steering the US economy is really hurting the equity markets," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "So putting together the new team gives a bit of a reassurance to the market, even if Obama isn't president yet."

Obama will be sworn in on January 20.

"There's likely to be more bad economic news," Shum said. "There's isn't enough clarity in the global economic picture. Oil prices are still looking for a bottom."

The future of Ford Motor Co., Chrysler LLC, and General Motors Corp. is also uncertain after Congress postponed debates on aid to the automakers.

Investors are looking for signs the Organization of Petroleum Exporting Countries, which accounts for 40 percent of global supply, may reduce output quotas. Venezuelan Oil Minister Rafael Ramirez said Sunday that OPEC should cut oil production by 1 million barrels per day at an informal meeting Nov. 29 meeting in Cairo.

The group, which cut output by 1.5 million barrels a day last month, will hold its next official meeting on Dec. 17.

"It's still a big question mark whether OPEC will make an additional cut at the Cairo meeting," Shum said. "Chances are better for a cut at the December meeting. Talk of a cut is providing some support for prices."

In other Nymex trading, gasoline futures rose 0.97 cent to $1.07 a gallon. Heating oil gained 0.54 cents to $1.71 a gallon while natural gas for December delivery jumped 14.3 cents to $6.62 per 1,000 cubic feet.

In London, December Brent crude rose 66 cents to $49.85 on the ICE Futures exchange.