Oil prices advance after successful German vote

29th September 2011, Comments 0 comments

World oil prices rose on Thursday after German lawmakers approved an expansion of the eurozone's rescue fund, easing concerns over the region's debt crisis, which is weighing on energy demand.

New York's main contract, West Texas Intermediate (WTI) for delivery in November, added 56 cents to $81.77 a barrel.

Brent North Sea crude for November increased by $1.07 to stand at $104.88.

Germany's parliament passed a beefed-up rescue fund for stricken eurozone countries by a large majority on Thursday in a vote seen as crucial to stem financial market turmoil.

The vote on expanding the 440-billion-euro ($599 billion) bailout fund was also seen as a crucial test of Chancellor Angela Merkel's authority amid fears of a major backbench rebellion.

German deputies voted by 523 to 85 in favour of expanding the size and the scope of the European Financial Stability Facility (EFSF). Three abstained.

"The German vote might provide some near term relief for investors but the effective size of the EFSF at 440 billion euros can deal only with the peripherals but not Spain and Italy," said VTB Capital analyst Neil MacKinnon.

He added: "So the vote is not a game-changer in resolving the crisis which ultimately requires bank recapitalisation and debt restructuring."

In a rollercoaster week for the oil market, prices had surged by more than four dollars in New York on Tuesday, mirroring huge gains in equities, as investors hoped that European leaders would contain the eurozone debt crisis.

But crude futures tumbled more than three dollars Wednesday as those hopes subsided, and after data showed a bigger than expected rise in energy stockpiles in the United States, indicating weak demand in the world's biggest economy.

The US government's Department of Energy said crude oil stockpiles rose by 1.9 million barrels last week in the United States. Analysts polled by Dow Jones Newswires had forecast an increase of 700,000 barrels.

"The crude oil build-up was fairly large, and gasoline as well," said John Kilduff of Again Capital.

"But more importantly, the four-week average demand numbers were down significantly and I think it speaks of the state of the economy right now and the diminished prospects for it," he added.

© 2011 AFP

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