Oil jumps 2 percent as rescue plan lifts markets

By Robert Gibbons

NEW YORK (BestGrowthStock) – Oil prices surged on Monday, ending more than 2 percent higher as a $1 trillion global emergency package to stabilize the euro helped lift commodities and stock markets as investor risk appetite increased.

Crude futures ended a string of four down sessions and prices rallied from Friday’s intraday slide to a nearly three-month low below $75.

The size of the aid package surprised market participants and boosted confidence that oil demand growth will continue. This boosted crude prices in the first trading session after their biggest weekly loss since December, 2008.

“The risk trade has come back after traders last week ran for cover as the uncertainty about the (Greece) bailout plan kept traders on edge,” Phil Flynn, analyst at PFGBest Research in Chicago said in a note.

The rescue package consists of 440 billion euros in guarantees from euro area states, plus 60 billion euros in a European stabilization fund. Another 250 billion euros from the International Monetary Fund.

U.S. light crude oil futures for June delivery rose $1.69, or 2.25 percent, to settle at $76.80 a barrel on Monday, after hitting an intraday high of $78.51, up $3.40. ICE Brent crude for June rose $1.85 to settle at $80.12.

The euro seesawed, rebounding from a 14-month low hit last week to above $1.30 before paring gains. (USD: ) The dollar index (Read more about the global trade. ) (.DXY: ) slipped.

On Wall Street, major stock indexes surged, with the S&P 500 index (.SPX: ) having its best opening jump on record. (.N: )

“The euro loved the rescue package early, then equities went up and technically there was a bounce (by crude) off a double bottom of Thursday and Friday’s lows,” said Richard Ilczyszyn senior market strategist at Lind-Waldock in Chicago.

Price charts show U.S. crude supported by Friday’s $74.51 and Thursday’s $74.58 intraday lows and that last week’s slide was too sharp not to be followed by a rebound.

Front-month U.S. oil futures ended back above the 200-day moving average of $76.47 on Monday, after dropping below it during last week’s heavy slide. Crude had most recently dipped below that average in February during intraday trade.

INVENTORIES STILL HIGH

OPEC Secretary-General Abdullah al-Badri said he expected the rescue package to boost oil prices back above $80 a barrel, but warned of wild price swings as the global economy continued on its path to recovery.

Badri said on Sunday that oil markets were oversupplied and urged better OPEC-member compliance with output targets. He said it was too early to talk about OPEC action to halt the price fall sparked by the euro zone crisis.

After last week’s wild swings in the stock market, the at-the-money implied volatility index for front-month crude futures rose to 40.43, highest since December 2009.

High U.S. oil inventories, especially record levels at the Cushing, Oklahoma, delivery point for U.S. benchmark crude oil, have kept front-month crude futures priced well below the next month. The spread rose on Monday and was over $3.50 in late trading.

But top exporter Saudi Arabia will maintain full volumes to its main Asian customers and keep supplies steady to at least one European major next month.

The Saudi’s decision came as data showed China imported 21.17 million tons of crude oil or 5.15 million barrels per day in April, a record high level on a daily basis and 31 percent above the year-ago period, according to customs department data.

Money

(Additional reporting by Gene Ramos in New York, Christopher Johnson in London, Alejandro Barbajosa in Tokyo; Editing by David Gregorio)

Oil jumps 2 percent as rescue plan lifts markets