Crude prices firm as traders await key EU summit
Oil prices rose on Wednesday on the eve of a EU summit that will focus on resolving the eurozone debt crisis, and before the weekly snapshot of crude reserves in top consumer the United States.
In London midday trading, Brent North Sea crude for January edged 14 cents higher to $110.95 per barrel.
New York's main contract, light sweet crude for delivery in January, rose 47 cents to $101.75 a barrel.
The market had risen on Tuesday, partly on concerns about simmering tensions between Iran and the West over Tehran's nuclear program.
"Crude oil prices are in consolidation mode today as investors remain cautious ahead of the European Union summit," said Sucden Financial Research analyst Myrto Sokou.
"There are not any important US economic data for today, which explains the low volumes and tight range in the oil market.
"We are monitoring the global equity markets for some direction; however crude oil prices are likely to trade sideways for the rest of the day."
European stock markets and the euro rallied Wednesday on optimism that an EU summit beginning on Thursday will result in a major breakthrough on the eurozone crisis, analysts said.
Traders are cautiously optimistic that a plan thrashed out between German Chancellor Angela Merkel and French President Nicolas Sarkozy, including strict new rules for fiscal discipline within Europe, will restore confidence.
Market participants will also digest the latest interest rate decision from the European Central Bank (ECB) on Thursday.
The ECB is expected to cut interest rates for the second time in two months as the region teeters on the brink of recession.
"A rate cut could see a short-term boost to oil and other commodity prices, but the focus will remain on the EU summit in Brussels," added VTB Capital analyst Andrey Kryuchenkov.
Aside from the EU summit, traders are also tracking the build-up to next week's meeting of the Organisation of Petroleum Exporting Countries (OPEC).
The head of OPEC on Wednesday described current oil prices as "satisfactory" to both consumers and producers, insisting a "decent" price is needed to encourage investments in production.
"Average oil price this year is satisfactory for producers and consumers," OPEC Secretary General Abdullah El-Badri told participants at the World Petroleum Congress in Doha.
"This year, the oil market has been in constant flux," he said, citing uncertainties over global economic growth, Japan's multiple disasters and unrest in North Africa and the Middle East.
But he insisted that there was "no shortage of oil."
Members of OPEC will meet on December 14 in Vienna, but many member states have indicated that there will be no changes to production, despite a quicker-than-expected resumption of Libyan oil output.
El-Badri added that he hoped the EU would not press sanctions on Iran's "difficult to replace" oil exports.
"I really hope there will not be an EU embargo on Iranian oil," he said.
"It will be very, very difficult to replace" the exports of this OPEC member, he added.
"Europe now is facing some difficulties... so to cut these 865,000 barrels a day immediately, I think it will be a problem," he said, apparently referring to Iran's exports to all of Europe, as the EU imports only around 450,000 bpd from Iran, according to the International Energy Agency.
The EU last week piled up pressure on Tehran following an attack on the British embassy, beefing up sanctions over Iran's nuclear program, while it threatened to hit its oil and finance sectors next.
© 2011 AFP