COLUMBUS, Ohio (AP) -- After falling nearly 30 percent in the past week, oil prices rebounded Tuesday after Federal Reserve Chairman Ben Bernanke said the stimulus package being crafted by President-elect Barack Obama and Congress could provide a "significant boost" to the sinking U.S. economy.
Oil hit $50.47 one week ago, but has been in a tailspin since as worries about the weakening global economy overshadow Mideast tensions, OPEC production cuts, the Russian-Ukraine natural gas dispute and a winter season expected to deliver the coldest weather in a decade.
Light, sweet crude for February delivery rose $1.08 to $38.67 a barrel on the New York Mercantile Exchange after hitting a low of $36.10 earlier Tuesday.
Speaking at the London School of Economics, Bernanke made clear that such a recovery plan was needed as part of a broader, multi-pronged government response to combat the worst financial crisis to hit the U.S. and the global economy since the 1930s.
"The incoming administration and the Congress are currently discussing a substantial fiscal package that, if enacted, could provide a significant boost to economic activity," Bernanke said.
"Let's face it, we needed a vote of confidence after yesterday," he said after prices fell 8 percent.
Flynn said traders have been hearing nothing but negative news about bad the economy and the upcoming earnings season will be. Traders interpreted Bernanke as saying the economy is showing signs of stabilizing.
"That's the best news an energy trader has gotten all week," he said.
The short-term energy outlook released Tuesday by the Department of Energy said falling demand will likely continue through the year.
"U.S. real gross domestic product (GDP) is expected to decline by 2 percent in 2009, leading to decreases in domestic energy consumption for all major fuels," the department's Energy Information Administration said.
Economic recovery is projected to begin in 2010, according to the government.
That report was offset by new production cuts from Saudi Arabia new figures on Chinese exports that show that they did not fall as much as been expected, Flynn said.
The Chinese government said Tuesday that December exports fell 2.8 percent from the year-ago month, after a 2.2 percent decline in November. Exports fell at their fastest rate in a decade.
Also this week, Saudi Arabia, the worlds largest oil exporter, said it will tighten its own belt and will cut production below quotas it agreed to as a member of OPEC.
The Organization of Petroleum Exporting Countries, which supplies 40 percent of the world's crude, has announced production cuts of 4.2 million barrels a day in an effort to stop declining crude prices.
"OPEC is starting to get concerned - again - and the ministers are determined to generate a rally," according to a daily report from Cameron Hanover.
Prices at the pump remained flat overnight at $1.79 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices are 12.7 cents higher than a month ago, but are $1.28 a gallon below the year ago number.
In other Nymex trading, gasoline futures rose 3.4 cents to $1.182 a gallon. Heating oil advanced 5.76 cents to $1.53 a gallon while natural gas for February delivery slid 17.8 cents to $5.364 per 1,000 cubic feet.