International crude prices soared to over US$54 per barrel on Monday and Wednesday after positive indicators showed the beginning of an economic recovery in the US and China. However, concerns over the sustainability of the economic recovery and the spread of the H1N1 flu would continue to keep prices in check, analysts said.

Crude oil for June delivery rose as much as 1.1 percent to US$54.44 per barrel in electronic trading on the New York Mercantile Exchange. Oil prices have so far surged nearly 22 percent this year.

The recovery came close on the heels of the comments by US Federal Reserve Chairman Ben Bernanke that economic growth and crude demand may pick up by the end of the year.

The price recovery was also partly due to the positive growth in the Chinese manufacturing index, a sign that the world's third-biggest economy is recovering.

The CLSA China Purchasing Managers' Index (PMI), released on Monday, expanded for the first time in nine months to 50.1 in April, up from 44.8 in March. The other Chinese version of PMI, issued by China Federation of Logistics and Purchasing on Friday, rose to 53.5 in April from 52.4 in March.

However, energy experts warned that the price rise was sporadic and not a turning point for international crude prices to move up for good.

"In general the economy is still not that bullish, " said Niu Li, senior researcher at the State Information Center. "There is nothing to support the market recovery."

"The Chinese version PMI is weighted for large-scale State-owned enterprises, and contributes to just 30 percent of the country's GDP. It does not take into consideration the conditions of the medium- and small-sized private companies, which do not benefit much from the recent economic stimulus package," Niu said.

Oil has traded near US$50 per barrel for more than a month since it dropped from a record high of US$147 in July and bounced back from below US$35 in February.

Oil demand usually goes up in the second quarter of the year, but this year, the case could be different as the economy is still in a recession, said Kang Wu, senior fellow, tracking China's energy policies at the Hawaii-based East-West Center.

"There will be further fluctuations in the coming months, but I believe it will turn to positive growth in the fourth quarter," Wu said.

As international crude prices are creeping upwards, domestic car users are also concerned about the possibility of another hike in fuel prices.

China adjusts its fuel prices when crude oil costs fluctuate more than 4 percent over 22 straight working days after it removed its caps on gasoline and diesel prices last year, Zhou Jiping, president, PetroChina, said in March.

China's gasoline and diesel ex-factory prices are linked to the prices of Brent, Dubai and Cinta crude oil, and it will also taken into account the cost of transportation, processing, taxes and 5 percent refining profit, PetroChina said in a statement on its website yesterday.

The government increased oil-product prices by 5 percent on March 25 to reflect higher international crude prices.

"If the international crude prices keep on surging, it will be forced to hike prices," Niu said.

(China Daily May 7, 2009)