Oil suffers sixth straight weekly loss
London, June 9, 2012
Oil prices fell on Friday on the cusp of a sixth straight weekly loss as the euro zone's debt crisis and diminished hopes for monetary stimulus reinforced concerns about petroleum demand.
Another round of talks between the UN International Atomic Energy Agency and Iran resulted in no progress toward an agreement on allowing inspectors access to key facilities, the IAEA said, helping oil recover some losses, brokers and traders said.
The euro pared losses, but earlier dropped 1 per cent after Thursday's downgrade to Spain's credit rating and on the signs of economic weakness in Italy and Germany. The stronger dollar added pressure to dollar-denominated oil prices.
Federal Reserve chairman Ben Bernanke's Thursday appearance before a congressional committee offered little encouragement to investors hoping the Fed would launch a third round of bond buying, or quantitative easing.
'The sell-off was mainly due to market sentiment surrounding Bernanke's speech,' said James Zhang, analyst at Standard Bank.
'(Investors) had too high expectations that Bernanke would announce a new round of quantitative easing.'
Global equities also felt pressure from the euro zone turmoil that is expected to cause Spain this weekend to request a financial package to prop up its troubled banks, though US stocks managed gains.
US President Barack Obama said on Friday that European leaders face an 'urgent need to act' to resolve the region's financial crisis as the threat of a renewed recession there spells dangers for an anemic US recovery.
Brent July crude fell $1.59 to $98.34 a barrel by 1:52 pm, off its low of $97.19. A close above $98.43 is needed to avoid a sixth weekly loss in a row, which would be the longest weekly losing streak since 2002.
Brent prices had recovered above the $100 level during the week after slumping to a 16-month low of $95.63 on Monday
US July crude was down $1.60 at $83.22, after falling as low as $82 and needing a close above last Friday's $83.23 settlement to avoid a sixth consecutive down week, which would mark the longest string of weekly losses since 1998.
'The oil markets remain pressured by debt problems in Europe and global economic worries,' said Tony Rosado, options broker at New-York-based GA Global Markets.
'Unless US crude climbs above $87.35, I don't see it breaking the current move to the downside.'
He added that a drop below US crude's weekly low of $81.21 on a settlement basis could precipitate a further break to the downside. Brent's premium to US crude hovered little changed near $15 a barrel.
Spain is expected to request assistance for its troubled banks soon, European Central Bank Vice President Vitor Constancio said in remarks aired by Portugal's Radio Renascenca.
Earlier, Reuters reported that Spain is expected to make a request over the weekend for a financial package to prop up its troubled banks, according to two senior European Union officials and one German source.
Spain's Economy Ministry said on Friday that the first independent audit of its banking system, which will detail how much extra capital needs it requires, would be completed by June 21.
The ongoing dispute over Iran's nuclear ambitions continued to keep investors cautious and remains a supportive factor to oil prices.
Iran and the six powers - the US, France, Russia, China, Germany and Britain - will meet for a third time this year in Moscow on June 18-19 to discuss the nuclear issue after making little progress at their most recent meeting.-Reuters