Oil steadies above $58 after easing from 6-month high

BACK UP: US crude is up about 80 percent from a January low of $32.70 a barrel.(Getty Images)

Oil retreated on Monday to $58 a barrel, pressured partly by weaker equity markets and a firmer dollar.

Profit-taking had also helped drive the market back from six-month highs reached on Friday.

US crude was down 47 cents at $58.16 a barrel by 07.15, UAE time, off a session low of $56.78. London Brent crude was down 92 cents at $57.22.

Crude hit a six-month high of $58.75 after the US economy shed fewer than expected jobs in April and government stress test results removed some uncertainty over the health of major American banks.

A mood among investors that the worst of the downturn might be over has helped boost global equity markets and oil has followed.

"It all depends on the stock markets," said Christopher Bellew, of Bache Commodities Ltd.

"We would need a substantial deterioration in equity markets for oil to go back into its old range. We seem to have broken into a new range of around $55-$59 a barrel," he said.

Oil, which has plummeted from a record high above $147 a barrel reached last year, has edged higher over the past three months alongside a rally in equity markets.

US crude is up about 80 percent from a January low of $32.70 a barrel.

The rally faltered on Monday due in part to a weaker tone across equity markets.

Wall Street fell after four big US banks announced plans to sell more than $6bn of common stock to raise capital and repay funds received under a bailout plan.

"Without fresh signs that the world economy is improving, oil traders decided to book profits," said Peter Beutel, president, Cameron Hanover, New Canaan, Connecticut.

News from China, the world's second biggest energy consumer, supported the view that the economic climate is brightening.

A top Chinese central banker said the government's stimulus plan had worked better than expected, while crude imports data showed a spike in demand.

China's April crude oil imports saw the first monthly increase of the year and hit the second-highest record on a daily basis, providing more evidence that oil demand in the country was picking up.

In the United States, the world's biggest oil consumer, utilisation at refineries was up last week by 2.6 percent to 83.3 percent.

"We believe this reflects refineries gearing up for the US driving season," Deutsche Bank said in a research note.

New York RBOB gasoline futures struck a six month high last week.

But the bank believes the oil market's supply/demand fundamentals remain bearish. (Reuters)

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