Oil prices jump as euro strengthens

22nd November 2010, Comments 0 comments

World oil prices rallied on Monday as the euro's value soared against the dollar following the agreement of a massive bailout for debt-laden Ireland, analysts said.

Brent North Sea crude for delivery in January advanced 1.03 dollars to 85.37 dollars a barrel in London trade.

New York's main contract, light sweet crude for December, gained 76 cents to 82.74 dollars.

Oil followed the weak dollar after the European Union (EU) and International Monetary Fund (IMF) agreed late Sunday to bail out crisis-hit Ireland.

A falling greenback makes dollar-priced oil cheaper for buyers using stronger currencies. In turn, that tends to stimulate demand and support higher prices.

"Crude is trading higher on dollar weakness and general optimism after an Irish bailout agreement was finally announced yesterday," said strategist Filip Petersson at SEB Commodity Research.

"The country was simply unable to save its banking system on its own. The details are not yet known but will be decided on this week. However, the package will be financed by the EU and IMF and is likely to be smaller than 100 billion euros and last for three years.

"The goal is that the package will stabilise the European sovereign debt situation enough to prevent a spread to Portugal and Spain."

On Monday the euro jumped as high as 1.3786 dollars. That compared with 1.3673 late in New York on Friday.

Europe's single currency and equities have faced heavy selling pressure in recent weeks due to the debt woes of Ireland and other struggling eurozone nations such as Greece, Portugal and Spain.

"Speculation regarding the size and the conditions of the package as well as the effects of the austerity measures are likely to be in the centre of attention today," added Petersson.

"Crude oil is likely to be pushed higher both by a buoyant euro (dollar weakness) and demand optimism through the bailout of the second euro nation."

The bailout -- the second emergency rescue within the eurozone this year -- was aimed at cleaning up Ireland's devastated banking sector and is "warranted" to protect Europe's wider economy, EU finance ministers said.

It comes six months after a 110-billion-euro EU-IMF rescue package for Greece.

© 2010 AFP

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