Oil rises $2 on easing Greek debt fears
London, June 29, 2011
Brent crude oil rose more than $2 a barrel on Wednesday as growing confidence that the Greek parliament would approve an austerity programme helped ease fears of a first euro zone sovereign debt default.
Expectations the programme would be passed, allowing a rollover of Greek government bonds, lifted stock markets and the euro and bolstered commodity markets.
ICE Brent futures for August rose $2.07 to a high of $110.85, before easing back to trade around $110.35 by 1114 GMT.
US light crude for August was up $1.17 cents at $94.06 a barrel. Both contracts rose over 2 percent on Tuesday.
'A higher euro/dollar, stronger stock markets and a greater appetite for commodities generally are supporting prices,' said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.
The large proportion of refined oil products, rather than crude, in the European release of oil stocks coordinated globally by the International Energy Agency also supported North Sea Brent.
'The release of the oil products by the IEA is supportive for Brent,' said Christophe Barret, global oil analyst at Credit Agricole in London.
Brent's premium above US light sweet crude narrowed to around $16 a barrel after rising above $17 on Tuesday. The spread was squeezed to below $13 at one point on Monday but recovered after news of the IEA stock disbursement.
The euro rose 0.5 percent while the dollar fell against a basket of currencies. Commodities often move inversely to the dollar as they are priced in the US currency on international markets.
'Any positive compromise within Europe, with Greece willing to make some sacrifices, will cause the euro and oil to rally,' said Jeremy Friesen, a commodity strategist at Societe Generale.
Oil also gained support after industry data showed a larger-than-expected drop in crude stocks and a surprise fall in gasoline inventories.
Investors were looking to government data due later on Wednesday for confirmation that oil supply was tightening in the US.
Arlene, the first tropical storm of the North Atlantic hurricane season, churned through the southwestern Gulf of Mexico on Tuesday but looked set to spare Mexico's oilfields from a direct hit.
There were still concerns about the release of emergency stocks from consumer countries that caused oil to tumble 7 per cent last week.
'There is still some heaviness in the market in relation to the increase in supply from strategic reserves,' Societe Generale's Friesen said. 'The increase in reserves is mostly coming from the US, which is the most oversupplied market in the world right now.' – Reuters