Greek bailout boosts oil market

22nd July 2011, Comments 0 comments

World oil prices climbed on Friday, boosted by news of a second bailout deal for Greece which dampened concerns that the eurozone debt crisis would sap global energy demand.

In Friday midday trade, New York's main contract, West Texas Intermediate (WTI) light, sweet crude for delivery in September, rose 31 cents to $99.44 a barrel.

Brent North Sea crude for September delivery gained 57 cents to $118.08 in London deals.

Eurozone leaders and private creditors agreed on Thursday to give Greece a new 159-billion-euro ($229-billion) bailout, risking a potential default to prevent the debt crisis from spreading worldwide.

In recent weeks, doubts over a new Greek eurozone bailout had sparked fears of a possible slump in European and global energy demand.

But New York crude spiked above $100 on Thursday in anticipation of the Greek deal as traders eyed the surging euro.

The European single currency had leapt to $1.4439 on Thursday in the wake of the deal, but dipped slightly on Friday.

"The plan, released after Thursday's close, provided more measures to stimulate the Greek economy and to intervene to support other nations before a crisis might develop," said Sucden analyst Brenda Sullivan.

"For now the Greek-focused deal sees general market sentiment more positive as evidenced by the strength in the euro, equities and energy markets."

A weaker dollar tends to boost the price of oil. Since crude prices are denominated in dollars, a fall in the greenback typically leads to increased oil consumption outside the United States.

The new Greek bailout included 109 billion euros in loans from the European Union and International Monetary Fund and 50 billion euros of funding from the private sector.

"Energy markets seemed to wait almost all week for Thursday's Greek aid deal," Sullivan said.

"Optimism Thursday over draft proposals suggesting a deal that could also help prevent debt-crisis contagion lifted sentiment and saw risk appetite improve.

"WTI futures broke above $100 per barrel for the first time since mid-June and Brent breached $119," she added.

Prices also advanced this week on optimism that politicians in Washington would reach a deal to raise the US federal government's debt ceiling and avert a potentially catastrophic default, analysts said.

The White House has said it sees "momentum" toward a deal to avert a disastrous early August debt default, but denied media reports that a compromise with top lawmakers may be imminent.

Time is running short before an August 2 deadline to raise the US goverment's $14.3-trillion official debt ceiling.

Separately, the International Energy Agency on Thursday said it was "not now seeking the release of additional" stocks of oil from strategic reserves in oil-consuming countries.

The Paris-based IEA judged that its decision on June 23 to release 60 million barrels had served a market need by bridging a shortfall of Libyan supplies.

But the agency said it "continues to closely monitor market conditions, and the IEA stands ready to augment the Libya Collective Action if market conditions again warrant."

© 2011 AFP

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