Mar. 23--West Texas Intermediate (WTI) prices rallied last week on US dollar weakness, the recovery in global equity markets and some positive US economic data. WTI settled at $51.06 a barrel on Friday, up $4.81 from a week earlier.

Oil prices surged as US dollar fell sharply against a basket of currencies after the Federal Reserve said it would pump $1 trillion into the recession-hit US economy. It aims to buy $300 billion in long-term treasury debt and expand its mortgage bond purchases by another $850 billion to inject liquidity into the financial system. The sharp drop in the dollar increased the appeal of commodities to investors, pushing prices of oil and gold higher. Crude prices were also supported by a rally in the stock market amid growing confidence in the banking sector.

Opec agreed over the previous weekend to leave existing output targets unchanged as it was concerned for the economy and believed that supply curbs so far had begun to remove the excess from the oil market. Opec's decision was well received by leaders around the world. The Algerian oil minister commented that Opec should be able to increase its compliance rate to 95 percent, from last month's level of 79 percent, of the quota of 4.2 million barrels per day (mbd) before its next meeting on May 28.

On the economic front, sentiment improved early last week as US housing starts unexpectedly jumped 22.2 percent in February to 583,000 units from the record low in January. However, the number of US workers drawing unemployment benefits hit another record high at 5.47 million. Meanwhile, the World Bank lowered its forecast for China's 2009 GDP growth to 6.5 percent from 7.5 percent, signifying the global economy would remain very weak.

High inventories again limited oil pricing gains. US crude inventories rose more than expected by 2 million barrels last week, due to higher imports, to reach 9.18 million barrels. Gasoline posted a surprise buildup of 3.2 million barrels as refiners seasonally increased motor fuel production. Crude storage at Cushing, Oklahoma, rose by 300,000 barrels to settle at 33.9 million barrels, up for the first time in four weeks.

This week, crude prices will be pressured by expectations of more bleak economic data in the US. New and existing home sales in February, final GDP for the fourth quarter last year, and durable goods orders in February will be closely monitored by the market. Hence, crude prices are expected to trade lower within the $45-50 range.

Gasoline prices in Singapore jumped $5 a barrel last week to close at around $57 on mixed fundamentals. Steady demand from the key regional importers helped offset an influx of gasoline supplies coming into the region. Aggressive buying interest from traders on expectations that maintenance in Asia and the Middle East would limit supply also lent support to gasoline's strength. Looking ahead, tight regional supply will continue to support gasoline prices over the near term.

Diesel prices in Singapore surged $8 to settle at around $56 a barrel following the increase in crude prices and purchases ahead of the refinery turnaround season.

Bearish market fundamentals and limited arbitrage opportunities to move diesel outside the region will weigh on diesel prices this week.

Prepared by Thai Oil Plc

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