OIL FUTURES: Crude Helped By Financial Markets, Hurt By Supply

By Wayne Ma
Of DOW JONES NEWSWIRES
SINGAPORE (Dow Jones)--Crude oil futures remained above $80 a barrel in Asia Tuesday on expectations that improving financial markets will boost demand for oil, but gains are likely limited due to an overhang of crude supply, some analysts said.

"The market tends to huff around the $80 level," said Victor Shum, an analyst at Purvin & Gertz in Singapore. "There is no question that on a global basis, oil demand has picked up compared with a year ago," he said. "But the supply of oil has also been increasing at the same time."

On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at $81.52 a barrel at 0350 GMT, down 8 cents in the Globex electronic session. May Brent crude on London's ICE Futures exchange fell 8 cents to $80.46 a barrel.

Data due Wednesday from the U.S. Department of Energy is expected to show a rise in crude inventories. Stockpiles are expected to rise by 1.2 million barrels, according to the average estimate of eight analysts polled by Dow Jones Newswires.

There have been strong attempts by investors to push the price of crude oil above $84 a barrel, Shum said. However, most of that has been driven not by improving fundamentals but by speculators chasing after returns, he said.

"The push to higher prices primarily comes from a lot of cheap money," he added.

Oil prices will likely take cues from the direction of financial markets in the coming days, said Jim Ritterbusch, president of Ritterbusch & Associates, in a note to subscribers.

U.S. stocks rose overnight to 17-month highs after lawmakers voted late Sunday to approve a health-care overhaul bill.

"Downside price follow-through below the $80 (a barrel) mark will prove difficult without major assistance from the financial markets," he said. "A sustained price correction will be extremely difficult with the stock market posting new highs."

Nymex reformulated gasoline blendstock for April--the benchmark gasoline contract--fell 37 points to 225.25 cents a gallon, while April heating oil traded at 208.45 cents, 8 points higher.

ICE gasoil for April changed hands at $666.75 a metric ton, up $4.50 from Monday's settlement.

-By Wayne Ma, Dow Jones Newswires; +65 6415 4065; wayne.ma@dowjones.com