Monday, May 09, 2011

By Selina Williams

Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Crude futures rebounded Monday in line with other commodities, following last week's significant losses, as buying interest returned on the lower prices, a weakening of the U.S. dollar, and worries over global oil supplies.

Some market participants even said that last week's sell-off, in which Nymex crude fell around 15% over the course of the week, appeared to be mostly played out, at least for the moment, given that worries over Middle East tensions still prevail, Libyan barrels are still absent from the market, and interest rates are unlikely to go up.

"Fund managers had a chance this morning to come in and slam it (the price) again and they didn't, so maybe the fund selling is over...People aren't so fearful now to be in commodities as they were Thursday afternoon," said London Capital Group's Andy Riddell.

At 1028 GMT, the front-month June Brent contract on London's ICE futures exchange was up $3.04, or 2.8% higher, at $112.17 a barrel. The front-month June contract on the New York Mercantile Exchange was trading up $2.65, or 2.7% higher, at $99.83 a barrel.

Other commodities also staged a partial recovery in early trade Monday after last week's rout. Gold was back up above the psychologically important level of $1,500 a troy ounce, partly offsetting last week's dramatic losses.

The oil prices was also boosted by the U.S. dollar's reversal of last week's strength as it fell against a strong Euro in early trade. A weak dollar typically lifts crude oil prices, as the dollar-demoninated commodity becomes cheaper in other currencies and hard assets become a more attractive investment.

However, the oil market is still extremely volatile, and another move to the downside can't be ruled out if more speculative financial investors close out their long positions, analysts said.

"Given the ferocity of the recent decline, we likely will have more downside pressure ahead of us...We will have to wait and see what happens going forward, but the odds of a V-shaped snap-back in crude does not look that promising to us," said MF Global Daily in a research note.

MF Global pointed to $90 a barrel and $101 a barrel as support levels for the U.S. benchmark and Brent respectively.

This week, market participants will be looking to Chinese economic data including April trade, oil imports and industrial output numbers, due Tuesday and Wednesday for indications of demand there.

Reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency will also be of key interest this week for current oil demand forecasts and any signs that the high prices have impacted demand.

"Given the higher price level, growth of global oil demand could be slightly lower than expected. Possible downward revisions of demand forecasts should prevent a recovery of oil prices," Commerzbank said in a note.

The ICE's gasoil contract for May delivery was up $17.25, or 1.9% higher, at $919 a metric ton, while Nymex gasoline for June delivery was up 813 points, or 2.6% higher, at $3.1714 a gallon.

-By Selina Williams, Dow Jones Newswires; 4420-7842-9262; selina.williams@dowjones.com

(END) Dow Jones Newswires

May 09, 2011 06:43 ET (10:43 GMT)