Oil steady above $63 on world stock market rebound

By SANDY SHORE - 14 hours ago

DENVER (AP) - Oil prices held steady Tuesday as Wall Street and other stock markets rebounded, a new report that found U.S. consumer confidence plunged to its lowest level in 41 years.

Oil investors have been taking a cue from plunging markets, fearing that major economies are headed for a significant recession. A recession would cut demand for oil, and prices have fallen 58 percent since reaching a record $147.27 on July 11.

After the Conference Board said its consumer confidence index fell to 38 during October - far worse that the 51 reading that analysts had anticipated.

"I think it’s just been a lot of bad news after bad news," said Fred Rozell, retail pricing director at Oil Price Information Service.

The Conference Board said consumers who were surveyed expected labor and business conditions to worsen considerably in the months ahead.

"We are going to see a pretty sizable recession here," Rozell said, but added, "the American economy is fairly resilient. I don’t think it’s all doom and gloom."

Light, sweet crude for December delivery rose 7 cents to $63.29 a barrel on the New York Mercantile Exchange. The contract fell 93 cents to settle at $63.22 on Monday, the lowest settlement since May 29, 2007.

Investors seemed to have priced in the bad economic news early on.

In late morning trading, the Dow Jones industrial average rose 171.32, or 2.10 percent, to 8,347.98 in volatile trading that saw the Dow rise 331 points in the early going.

Earlier Tuesday, key Asian stock markets rebounded, including Japan’s Nikkei 225 index, up 6.4 percent and Hong Kong’s Hang Seng index, jumping 14.4 percent - its biggest gain in 11 years.

"It was crude reacting to the Nikkei," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "It began with a turnaround in Asian markets."

European stock markets also gained, with Germany’s DAX up 8 percent and Britain’s FTSE 100 rising 3 percent.

"It’s quite a severe slowdown that’s been priced in already," Kornafel said. "If the credit market remains tight and the recession worsens, we could certainly go into the $50s and even below $50, but that would be an overshoot to the downside."

Prices have fallen despite an announcement last week that OPEC would cut oil production by 1.5 million barrels a day. The Organization of Petroleum Exporting Countries, which controls about 40 percent of global crude oil production, has not ruled out another cut when it meets in December.

OPEC members warned Tuesday that low oil prices have created a crisis situation that threatens key investment in production.

At an annual oil and money conference in London, Qatar’s energy minister, Abdulla bin Hamad Al Attiyah, defended OPEC’s cut last week, saying it was necessary amid falling demand due to the global economic turmoil.

U.S. consumers have drastically altered their behavior, and gasoline prices continue to tumble.

Over the past week, a gallon of gas fell more than 25 cents, the Department of Energy reported Monday.

Gasoline fell another 4 cents overnight to $2.629, according to auto club AAA, the Oil Price Information Service and Wright Express. That’s roughly a dollar less than what was paid just a month ago.

United Arab Emirates energy minister Mohammed Bin Dhaen al-Hamli said the current crude prices were "very dangerous for the world’s economy."

With the falling price of crude, gasoline prices will continue to fall, into the $2.25-$2.50 a gallon range, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.

"Normally, if you would see gas prices cut in half you could almost assume there would be a pick up in driving miles and consumer demand."

In other Nymex trading, gasoline futures rose 2.69 cents to $1.50 a gallon and heating oil gained 2.56 cents to $1.94 a gallon. Natural gas for November delivery added 3.2 cents to $6.15 per 1,000 cubic feet.

In London, December Brent crude rose 20 cents to $61.61 a barrel on the ICE Futures exchange.

AP writers Alex Kennedy in Singapore and Jane Wardell and Louise Watt in London contributed to this report.