Oil prices turn mixed after DoE report

28th April 2010, Comments 0 comments

World oil prices, shaken by the Greek crisis and the strengthening dollar, turned mixed on Wednesday as traders digested rising crude oil reserves in key energy consumer the United States.

London's Brent North Sea crude for June fell 18 cents to 85.60 dollars per barrel.

New York's main contract, light sweet crude for June, rose 42 cents to 82.86 dollars a barrel.

The US Department of Energy (DoE) said Wednesday that crude reserves increased by 1.9 million barrels in the week ending April 23, indicating weaker demand.

Market expectations had been for a gain of 800,000 barrels, according to analysts polled by Dow Jones Newswires.

Distillates, which include diesel and heating fuel, rose by 2.9 million barrels last week, which was higher than expectations for an increase of 1.2 million.

The DoE added that gasoline or petrol stockpiles fell 1,2 million barrels, confounding forecasts of a 600,000-barrel gain.

Crude oil had fallen Tuesday and earlier Wednesday on heightened concerns about a Greek financial crisis after its sovereign debt was slashed to junk status, fanning fears of a default.

Barclays Capital analysts said that the market was "sharply pressurised by rising concerns over Greece's debt problems".

A fierce global equities sell-off began Tuesday after ratings agency Standard & Poor's cut Greek debt to junk, while a downgrade to Portugal also stoked concerns about a widening eurozone crisis.

In the foreign exchange market on Wednesday, the European single currency plunged to 1.3143 dollars -- a low last seen in April 2009.

A stronger US currency makes dollar-denominated crude oil more expensive to holders of weaker units, dampening demand and leading to lower prices.

"S&P's cutting Greek sovereign debt to junk status, along with their downgrading of Portugal's rating, sent shivers through the euro against other currencies and global markets, with all the expected consequences," said PVM oil analyst Philip Wiper.

"Stock markets worldwide fell more than two percent (on Tuesday) and oil prices inevitably went with them."

Greece faces a May 19 deadline to repay nine billion euros (12 billion dollars) in maturing debt. The downgrade by credit ratings agency S&P effectively shuts down its access to private capital.

Investors are meanwhile looking to the results later Wednesday of a US Federal Reserve board meeting on whether or not to raise its main interest rate.

© 2010 AFP

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