Page last updated at 21:59 GMT, Friday, 13 February 2009

Oil rises on stimulus plan hopes

Oil worker in Bahrain
Analysts question how much the oil price will benefit from Mr Obama's plan

Oil prices jumped after a week of falling crude prices on hopes US President Barack Obama's stimulus plan will revive the economy and demand.

US crude for March delivery rose $3.53 to $37.51 a barrel. Brent oil added $1.22 to $44.81 a barrel.

"It looks like a bounce on stimulus hopes," said Tom Bentz at BNP Paribas Commodity Futures.

In earlier trade prices dipped below $34 as oil producers' cartel Opec warned that demand would fall in 2009.

The House of Representatives has approved Mr Obama's revised emergency plan, including tax cuts and spending aimed at rescuing the US economy, and the Senate is expected to do so later.

But analysts have questioned how much the oil price will benefit from it.

'Steep decline'

The global slowdown has seen oil prices fall more than $110 off the highs seen in July last year and Opec forecasts that demand will fall by 0.67% in 2009.

Opec now forecasts that global oil demand will fall by 580,000 barrels a day to average 85.13 million barrels a day. It had earlier forecast that demand would fall by 180,000 barrels a day.

"World oil demand continues its steep decline from last year and is expected to follow this strong negative pattern at least for the first three quarters of the year," the oil producers' cartel said in its February report.

Oil demand in industrialised countries "is experiencing a steep decline resulting from the region's economic depression", the cartel said.

Earlier this week, the Energy Information Administration reported a seventh consecutive weekly increase in nationwide crude oil stocks as the economic crisis crushed business and consumer demand for fuel.

And rising unemployment has led to further fears of weakening demand for oil among US consumers.

New claims for unemployment benefit remain close to record highs.

The US jobless rate rose to 7.6% in January, up from 7.2% in December, according to official figures - the highest level since 1992.

The rapid rise in unemployment suggests the US recession is deepening.

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