Oil prices recover slightly amid caution over Greece

28th June 2011, Comments 0 comments

World oil prices rose on Tuesday, recovering some of their recent lost ground, but worries over the demand outlook lingered as the market watched to see how the Greek debt crisis is resolved, traders said.

New York's main contract, West Texas Intermediate for delivery in August, added 64 cents to $91.25 a barrel.

Brent North Sea crude for August increased $1.26 to $107.25.

"Generally, prices are reflective of the economic condition of the world such as the debt issue in Greece," said Shailaja Nair, an analyst with energy information provider Platts.

Greece ground to a halt Tuesday as angry workers launched a 48-hour general strike against an austerity drive ordered by its government in exchange for a fresh European debt bailout.

Europe's economic affairs head Olli Rehn meanwhile warned that Greece faced "a critical juncture" and the austerity programme was the "only way to avoid immediate default."

A Greek default risks sparking contagion across the rest of Europe that many fear could affect global financial stability -- and demand for energy.

Oil tumbled last week after the International Energy Agency agreed to draw on emergency reserves to make up for lost Libyan supplies prompting a critical response from OPEC Secretary General Abdullah El-Badri.

"El-Badri has called upon the IEA to stop the release of strategic reserves immediately as there are no sufficient grounds for this measure in his view," Commerzbank analysts said in a note to clients.

"The harsh reaction of the OPEC secretary general suggests that the IEA's decision was not agreed with OPEC," they said.

"This increases the risk that OPEC members will react by reducing supply should oil prices come under too much pressure from the additional supply.

"Most OPEC members are dependent on higher oil prices because of higher fiscal expenditures," they added.

The IEA unexpectedly announced last Thursday that it would release 60 million barrels of crude from strategic oil stocks over the next month to curb high prices.

The United States, the world's largest oil-consuming nation, took the lead in moving to draw down reserves, saying it would release 30 million barrels from its Strategic Petroleum Reserve.

The Paris-based IEA, which represents 28 oil consuming nations, has called for higher OPEC production to prevent high prices from damaging global recovery.

But the Organization of Petroleum Exporting Countries (OPEC), whose 12 member nations pump 40 percent of the world's oil, opted to maintain output levels earlier this month.

Iran, which holds the OPEC presidency, accused the US and its European allies on Saturday of seeking to manipulate the oil market by forcing an "artificial" reduction in prices.

© 2011 AFP

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