Oil rises to $64 on Asian stock market rebound

SINGAPORE – Oil prices rose to $64 a barrel Tuesday in Asia as a rebound in regional stock markets bolstered sagging investor confidence over a global economic slowdown.

Light, sweet crude for December delivery rose 78 cents to $64.00 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore after trading as low as $61.75. The contract fell overnight 93 cents to close at $63.22, the lowest settlement since May 29, 2007.

Key Asian stock markets rebounded sharply Tuesday, including Japan's Nikkei 225 index, up 6.4 percent and Hong Kong's Hang Seng index, jumping 13 percent.

"It was crude reacting to the Nikkei," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "It began with a turnaround in Asian markets."

Oil investors have been taking a cue from a plunge in global stock markets that suggests major economies are headed for a significant recession over the next 12 months. Oil prices have fallen 58 percent since reaching a record $147.27 on July 11.

The Dow Jones industrial average fell 2.4 percent Monday after credit ratings agency Moody's Investors Service downgraded General Motors Corp.'s credit rating further into "junk" status, citing a sharp contraction of the U.S. auto market. The Standard & Poor's 500 index fell 3.2 percent.

"It's quite a severe slowdown that's been priced in already," Kornafel said. "If the credit market remains tight and the recession worsens, we could certainly go into the $50s and even below $50, but that would be an overshoot to the downside."

Prices have fallen despite a production quota cut of 1.5 million barrels a day by the Organization of Petroleum Exporting Countries last week. OPEC officials have said the group, which controls about 40 percent of global crude oil production, may cut output again at a meeting in December.

"It doesn't matter what OPEC does or other supply news, people are just so focused on demand and getting their money out of trades that no longer make money," Kornafel said. "There's no real attention being paid to fundamentals in the short-term. It's still the panic."

In other Nymex trading, gasoline futures rose 2.3 cents to $1.50 a gallon and heating oil gained 4.81 cent to $1.96 a gallon. Natural gas for November delivery fell 1.0 cents to $6.11 per 1,000 cubic feet.

In London, December Brent crude was up 9 cents to $61.50 a barrel on the ICE Futures exchange.