• BREAKING NEWS ABC shows live and on-demand -- Download the WATCH ABC app!

Oil rises slightly after overnight drop

December 19, 2008 12:00:00 AM PST
Light, sweet crude for February delivery was up 73 cents to $42.40 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract overnight fell $2.94 to settle at $41.67. The January contract, which expires on Friday, fell $3.84 overnight to settle at $36.22 after dropping as low as $35.98, levels last seen in June 2004. Investors have been discouraged by a stream of dismal economic news, highlighted by a string of company layoffs. Bristol-Myers Squibb Co., International Paper Co., Bank of America Corp. Western Digital Corp., Aetna Inc., and Newell Rubbermaid Inc., all announced mass job cuts in the past week. The Dow Jones industrial average fell 2.5 percent Thursday. "Every time you see the news - about China, the U.S., Europe - it's negative," said Clarence Chu, a trader with market-maker Hudson Capital Energy in Singapore. JPMorgan on Thursday cut its 2009 price target for oil to $43 a barrel from $69. Earlier this week, the 13-nation Organization of Petroleum Exporting Countries reduced its output quota by 2.2 million barrels a day in a bid to bolster prices that have slid about 71 percent since July. But prices fell after the Wednesday announcement, largely because investors had already anticipated a cut of that size by OPEC. "The cut had been priced in," Chu said. "If OPEC hadn't cut that much, the price would have fallen even more." Some investors had speculated prices may have bottomed earlier this month near $40 a barrel, a level that was breached by the January contract on Wednesday. However, the February contract has stayed above $40. "I wouldn't read too much into the January contract," Chu said. "I still consider oil above $40 because February was the most traded contract yesterday and today." In other Nymex trading, gasoline futures rose 1.81 cents to 98 cents a gallon. Heating oil gained 2.73 to $1.40 a gallon while natural gas for January delivery was steady at $5.55 per 1,000 cubic feet. In London, February Brent crude rose 41 cents to $43.77 a barrel on the ICE Futures exchange. - Get more L.A. breaking news, weather, traffic and sports - Have a news tip? Send your tips, video, or pictures