Oil prices diverge in volatile trade
Brent oil prices fell Wednesday on mounting fears over Italy's debt crisis, but New York crude rebounded following news that inventories sank across the board in top consumer the United States.
Brent North Sea oil for December delivery retreated 42 cents to $114.58 in late afternoon London deals, but trimmed earlier losses after the weekly US energy report.
And New York's main contract, light sweet crude for December, rose 84 cents to $97.64 in volatile deals, wiping out earlier falls.
The market was rocked on Wednesday as Italy's borrowing costs soared above a key level and reignited fears that the eurozone's long-running sovereign debt crisis could slash global energy demand.
Italian state borrowing costs soared Wednesday with the yield on benchmark 10-year bonds topping 7.0 percent, stoking concern over the plight of the indebted government.
Traders dumped equities and rushed for safe-haven assets, like the dollar, after Italian Prime Minister Silvio Berlusconi announced late Tuesday that he would resign later this month following the adoption of key budget reforms.
However, New York crude prices rebounded into positive territory after the US Department of Energy (DoE) announced on Wednesday that American crude reserves sank by 1.4 million barrels in the week ending November 4.
That confounded market expectations for a gain of 700,000 barrels, according to analysts polled by Dow Jones Newswires, and indicated strengthening demand in the world's biggest oil consuming nation.
The DoE added that gasoline or petrol stockpiles fell 2.1 million barrels last week. Distillates, which include diesel and heating fuel, slid by 6.0 million barrels.
Oil losses were also limited by geopolitical concerns over major crude producer Iran after the UN atomic watchdog released what it called "credible" intelligence suggesting that Tehran has worked on developing nuclear weapons.
The Vienna-based IAEA said it had "serious concerns" based on "credible" information indicating that the Islamic republic "has carried out activities relevant to the development of a nuclear explosive device."
With Washington threatening to increase international pressure on Iran and Israel's president stoking speculation of a pre-emptive strike, the IAEA report was set to stoke tensions in the oil-rich Middle East.
Iran in turn vowed that it "will not budge an iota" from its nuclear path despite the new UN report hardening suspicions it is seeking atomic weapons.
Tehran maintains that its nuclear programme is exclusively civilian and peaceful in nature.
Elsewhere on Wednesday, the Paris-based International Energy Agency predicted that global oil demand was set to grow 14 percent by 2035, helped by China and emerging economies, and prices could hit $120 per barrel.
© 2011 AFP