Oil prices diverge, with all eyes on Cyprus

22nd March 2013, Comments 0 comments

Global crude oil prices diverged on Friday as traders tracked efforts by Cyprus to draw up a revised plan for a vital bailout, while winning support from Chinese data.

Brent North Sea crude for delivery in May dipped five cents to $107.42 a barrel in London early afternoon deals.

New York's main contract, light sweet crude for May, won 17 cents to $92.92 a barrel.

"There are no other economic data for today in the United States or eurozone, so all eyes remain on Cyprus regarding any further negotiations that could avoid the country's banking system to default," said Sucden brokers analyst Myrto Sokou.

"It seems quite an uninspiring trading session for the oil market, with crude oil prices possibly consolidating within the recent range, while any surprises from Cyprus could give some momentum to the market."

Cyprus was Friday locked in "hard negotiations" with a troika of lenders to save the eurozone member's banking system and economy in general from ruin, government spokesman Christos Stylianides said.

The European Union has given Nicosia until Monday to raise 5.8 billion euros ($7.47 billion) to unlock loans worth 10 billion euros or face being choked from European Central Bank emergency funding in a move that would bankrupt the island.

"I think positive Chinese data is keeping prices up, while the market waits for Cyprus to make a decision on its bailout deal," said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.

Manufacturing activity in China, the world's largest energy user, improved in March after expanding at its slowest pace in four months in February, HSBC said Thursday.

The British banking giant's preliminary purchasing managers' index (PMI) for China, a widely watched barometer of the health of its economy, came in at 51.7 for the month from 50.4 in February.

A reading above 50 points to growth while anything below indicates contraction.

However, the market remains jittery about a possible debt default by Cyprus.

The withdrawal of ECB support for Cypriot banks could lead a possible run by customers scrambling to withdraw their cash, resulting in the collapse of the island's financial system.

Analysts fear this would cause contagion in the eurozone, which is already grappling with debt crises in other, bigger countries including Spain and Italy.

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© 2013 AFP

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