Oil steadies after heavy losses

16th June 2011, Comments 0 comments

Oil prices steadied Thursday after recent sharp losses as traders tracked the Greek debt crisis, positive US data, an Indian rate hike and a demand upgrade from the International Energy Agency.

Brent North Sea crude for August firmed 63 cents to $113.64 a barrel in late afternoon deals on the contract's first trading day.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for July delivery, slipped 11 cents to $94.70.

The oil market plunged on Wednesday -- the New York contract slumped $4.56 and Brent $3.06 -- as investors fretted about fresh signs of weakness in the US economy and Greek debt tensions which sent the dollar jumping.

"After (Wednesday's) bloodbath, the market is correcting back. It is too early to say whether the sell-off will continue," said analyst Juan Lliso at PVM Oil Associates.

On Thursday, the market got a boost from positive economic data from the United States, the world's top oil consuming nation.

New US jobless claims fell to 414,000 on the week ending June 11, a decline of four percent from the previous week and US housing starts grew more than expected in May, rebounding 3.5 percent from April.

At the same time, traders expressed concern over India's decision to raise interest rates by 25 basis points -- its 10th hike in 16 months -- in a bid to tame high inflation.

"Crude oil prices have continued to struggle near their recent lows as concerns about global recovery and Asian demand weigh on sentiment," CMC Markets analyst Michael Hewson said.

The Indian rate hike to "7.5 percent has signalled that these emerging economies are starting to worry that the current pace of growth is fuelling inflationary pressures."

He added: "We could well see China follow suit later this month after this week's earlier bank reserve requirement increase."

Sentiment was also dampened by concerns over a potential Greek debt default that could send shockwaves across global financial markets.

"This week Greece dominates the markets, bringing more uncertainty and nervous conditions," Sucden analyst Myrto Sokou said.

"The situation regarding the Greek debt crisis and the current political conditions look very tentative and fragile at the moment, prompting most equity and commodity markets to sell off (on Wednesday) as the US dollar surged against the euro."

A stronger US unit makes dollar-priced commodities more expensive for buyers using weaker currencies. In turn, that tends to weigh on demand and prices.

Elsewhere on Thursday, the International Energy Agency raised its global oil demand forecast for 2011 by 0.1 million barrels per day (mbd) to 89.3 mbd.

The Paris-based IEA added that it sees demand rising to 90.63 mbd in 2012, an increase of 0.6 mbd from its previous forecast that was given in December.

More OPEC oil is needed to tame rising prices which have been driven by fundamentals and emerging market demand, which should keep them above $100 a barrel, the IEA said.


© 2011 AFP

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