Oil prices extend gains after Greece ditches referendum plan

4th November 2011, Comments 0 comments

Oil prices rose further on Friday after Greece abandoned its plan to hold a referendum on the country's latest bailout, boosting investor optimism over the eurozone crisis, analysts said.

New York's main contract, light sweet crude for delivery in December, climbed 65 cents to $94.72 a barrel.

Brent North Sea crude for December jumped $1.27 to $112.10 in London late morning trade.

Crude futures had already rallied around 1.50 dollars on Thursday on signs that Greece would abandon its referendum plan.

Greek Finance Minister Evangelos Venizelos said on Friday he had told his European partners that Greece had officially scrapped its plan for a referendum that had enraged leaders Europe-wide.

"Oil prices are still being driven by external factors primarily. News that the planned referendum ... had been cancelled gave a lift to prices," said Commerzbank analyst Carsten Fritsch.

"Furthermore, the surprising interest rate cut by the ECB added to the positive mood, as it was interpreted by most market players as a growth enhancing factor."

The new head of the European Central Bank, Mario Draghi, surprised markets with a rate cut at his first policy-setting meeting on Thursday, citing "high uncertainty" and "intensified downside risks" for the 17-nation eurozone.

The ECB lowered its key rate to 1.25 percent from 1.50 percent.

"In view of the apparent U-turn by the ECB to a more growth-oriented monetary policy and the smaller likelihood now of a default by Greece in the near future, oil prices should remain well supported initially," said Fritsch.

© 2011 AFP

0 Comments To This Article