MW: Crude snaps back, buoyed by rescue plan for banks
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Crude-oil futures rallied 5% early Monday, moving in line with world equity markets after European and U.S. leaders laid out plans to prop up their ailing banking sectors that gave a boost to battered investor confidence.
Crude for November delivery rose $3.66 to $81.36 a barrel in electronic trading on Globex.
The crude contract rebounded after having tumbled fully 10.3% on Friday to close at $77.70 a barrel on the New York Mercantile Exchange.
U.S. stock futures and world stock markets rallied on Monday, as agreements reached in Paris and Washington to bolster the banking system restored some confidence after a week in which stocks dropped by nearly 20% in the U.S. and on a similar scale in equities markets around the world.
Treasury Secretary Henry Paulson laid out more details of his radical plans to buy equity in banks Friday, while the Group of Seven finance ministers and central bank governors urged its members to take whatever steps are necessary to restore market confidence.
"The announcements over the weekend helped lift sentiment and calmed fears of a global recession, which buoyed oil prices after heavy losses last week," said Nimit Khamar, an analyst at Sucden Research, in a note.
"However, risk aversion still remains elevated which could restrict any momentum gathering to the upside until we see evidence of these measures helping liquidity," he said.
European authorities led the way Monday on a series of efforts to recapitalize troubled banks and unclog short-term money markets, after a weekend of frantic talks aimed at averting a global economic meltdown. Read more.
On Sunday, leaders of the 15 nations in the euro zone gathered for high-stakes meetings in Paris. Euro-zone officials later agreed to a plan that would guarantee loans between banks through 2009 and allow governments to buy stocks in distressed financial firms.
Iran wants OPEC supply cut
Also on traders' radar screens, Agence-France Presse reported Sunday that Iran predicted that the Organization of the Petroleum Exporting Countries would vote to cut output at its November meeting.
It cited an Iranian state-media report quoting Mohammad Ali Khatibi, Iran's OPEC representative, as saying that the oil cartel would likely seek the cut "in order to balance supply and demand."
Last week, OPEC announced it would hold an emergency meeting on Nov. 18 in Vienna to discuss the global financial crisis, the world economic situation and the effect on the oil market. OPEC said in a statement that it's "concerned about the deteriorating economic conditions with contagion risks."
Also on the Globex to start the week, the other energy futures rallied. November reformulated gasoline rose 10 cents, or 6%, to $1.91 a gallon and November heating oil gained 13 cents, or 6%, to $2.34 a gallon.
November natural gas also moved higher, gaining 15 cents to $6.68 per million British thermal units.
