Crude oil prices rebound ahead of G20 talks

14th October 2011, Comments 0 comments

World oil prices jumped on Friday, boosted by upbeat US data, a weaker dollar and buoyant global stock markets before a weekend G20 finance meeting.

European equities and the euro also rose as investors awaited a crucial weekend meeting of G20 finance ministers in Paris, where they will focus on resolving the eurozone's sovereign debt crisis.

In late morning deals, Brent North Sea crude for delivery in November soared $2.02 to $113.13 a barrel, having earlier touched a three-week high at $113.46.

New York's main contract, light sweet crude for November, climbed $1.27 to $85.50 a barrel.

Prices had fallen on Thursday as traders fretted about slowing demand in China, the world's biggest energy consumer, after official data showed that its trade surplus narrowed for a second straight month.

Sentiment was also hit by an unexpected increase in crude reserves in the United States, the largest oil consumer in the world.

"WTI fell yesterday, on concerns over weakening US fuel demand and slowing crude imports into China," said Westhouse Securities analyst Trish Hart.

"However, this morning, WTI is over a dollar higher, bolstered by better-than-expected US consumer sales figures released yesterday afternoon, and Brent is ... two dollars higher."

In foreign exchange deals, the European single currency climbed back above $1.38 on Friday on hopes over the G20 gathering.

A weaker US currency makes dollar-priced crude cheaper for buyers using stronger currencies. This tends to stimulate demand and support higher prices.

Oil prices have rallied this week on mounting hopes of a resolution to the long-running eurozone debt crisis.

The market soared on Monday after German Chancellor Angela Merkel and French President Nicolas Sarkozy, leaders of the eurozone's two most powerful economies, agreed to deliver a comprehensive solution within weeks.

Crude futures also rose Tuesday on growing hopes that Slovakia would back a beefed-up eurozone bailout fund, and as the head of OPEC insisted the market was well supplied with crude oil and that the world was not set for recession.

At first, Slovakia's lawmakers rejected a revamp of the eurozone's European Financial Stability Facility (EFSF) rescue fund in a crunch vote late on Tuesday that also toppled the country's centre-right government.

However, Slovak politicians finally agreed on Wednesday to back an increase in the eurozone's EFSF bailout fund to 440 billion euros ($600 billion), which has now been fully ratified and approved by all 17 member nations.

"The bull market we saw in the first half of this week was supported by expectations that Slovakia would approve the plan to extend the EFSF," said PVM Oil Associates analyst Tamas Varga.

"After a political tug-of-war, a deal was struck on Wednesday to ratify the plan. The formal approval by the Slovak Parliament came yesterday."

Oil prices slid Wednesday on the weak dollar, as traders shrugged off news of demand forecast downgrades from both the International Energy Agency and the OPEC oil cartel.

Traders remain on edge over the eurozone crisis, amid concern that it could spark a new economic downturn and slash global demand for energy.

© 2011 AFP

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