Oil nudges up to $50 on recovery news

VIENNA -- Hopes of a possible recovery in crude demand in the second half of the year nudged oil prices upward Friday, but nagging worries about the state of the world economy kept them below $50 a barrel.

Oil prices have traded near that level for most of this month as investors ponder whether massive government stimulus packages around the world will be able to spark a rebound from the global recession.

Benchmark crude for June delivery rose 28 cents to $49.90 a barrel by noon in European electronic trading on the New York Mercantile Exchange. The contract rose Thursday 77 cents to settle at $49.62.

"The price has been fairly resilient at the $50 level given the oil market fundamentals in the near term are very negative," said Victor Shum, energy analyst with consultancy Purvin & Gertz in Singapore. "Some investors are looking ahead, believing in the eventual revival in the global economy."

A spike in joblessness and waning consumer spending during the last six months has helped keep prices from rising further. The U.S. Labor Department said Thursday that initial claims for unemployment compensation rose to a seasonally adjusted 640,000, up from a revised 613,000 the previous week. That was slightly above analysts' expectations.

The number of workers continuing to file claims for unemployment benefits topped 6.1 million.

General Motors Corp. said Thursday it will temporarily close 13 assembly plants in the U.S. and Mexico for between 3 and 11 weeks, laying off nearly 24,000 workers to pare back a bloated inventory.

The Organization of Petroleum Exporting Countries, which produces about 40 percent of global supply, is next meeting on May 28 and could announce another output cut on top of the 4.2 million a day of quota reductions the cartel has pledged since September.

"More bad macroeconomic or company news could pull down oil," Shum said. "If it goes down toward $40, it would put pressure on OPEC to cut."

One sign of the speed of the economic downturn is that natural gas in U.S. storage is now 36 percent greater than it was at this time last year. The Energy Department's Energy Information Administration said Thursday in its weekly report that natural gas inventories held in underground storage in the lower 48 states are 23 percent above the five-year average.

"Investors can only hold up the price without fundamentals for so long," Shum said.

Trader and analyst Stephen Schork suggested there was little reason for even small upward price movements, considering the sorry state of the world's economy and concomitant lack of appetite for crude.

"We do not have a thoughtful explanation as to why crude oil moved higher," he said in his Schork Report, "other than, there were more buyers than sellers."

In other Nymex trading, gasoline and heating oil for May delivery were flat at $1.39 a gallon and $1.32 a gallon. Natural gas for May delivery dropped by over a penny to $3.40 per 1,000 cubic feet.

In London, Brent prices rose 20 cents to $50.31 a barrel on the ICE Futures exchange.