Oil prices near one-month peak in London
Oil neared a one-month peak on Wednesday on the back of a weak dollar, but ran out of steam as traders digested demand forecast downgrades from the International Energy Agency and the OPEC oil cartel.
Brent North Sea crude for delivery in November rallied as high as $113 per barrel, reaching the highest level since September 16. It stood at $111.25 in late afternoon trade, up 52 cents from Tuesday's closing level.
New York's main contract, light sweet crude for November, dipped 44 cents to $85.37 per barrel, reversing earlier gains.
"Crude oil prices extended gains and climbed higher, as the weaker US dollar provided strong support to the oil market," said Sucden brokers analyst Myrto Sokou, in reference to earlier trade.
The European single currency soared to a three-week dollar high on Wednesday as markets expected Slovakia to eventually back expansion of a eurozone bailout fund despite lawmakers initially voting against it.
The euro surged to $1.3817, the highest level since mid-September, which compared with $1.3660 late in New York on Tuesday.
It later pulled back to stand at $1.3802 after European Commission president Jose Manuel Barroso called for an urgent recapitalisation of European banks amid ongoing turmoil over the eurozone sovereign debt crisis.
A weaker greenback makes dollar-priced crude cheaper for buyers using stronger currencies. This tends to stimulate demand and support higher oil prices.
Slovakia's parliament on Tuesday blocked a plan to expand the European Financial Stability Facility (EFSF), dealing another blow to the eurozone's leaders as they look for a solution to the bloc's debt and banking crisis.
It effectively stopped the expansion of the 440-billion-euro ($600 billion) bailout fund, despite warnings from European Central Bank chief Jean-Claude Trichet that the world financial system faces systemic dangers.
However four Slovak political parties announced Wednesday afternoon that they had reached an agreement to hold a second vote to approve the EFSF later this week.
Oil traders are worried that the eurozone debt crisis could spread and help spark a fresh global economic downturn -- and a collapse in demand for energy.
The International Energy Agency on Wednesday again cut its oil demand estimates as the economic outlook darkens.
The IEA, which advises the developed countries on energy policy and developments, cut its oil demand estimate for 2012 by 210,000 barrels per day to 90.5 million bpd.
On Tuesday, the OPEC oil cartel cut its world demand forecasts for 2011 and 2012 for the third time in a row, citing uncertainty in the global economy and weaker demand from developing giants China and India.
© 2011 AFP