Oil prices surge on weak dollar, Italy rumours

28th November 2011, Comments 0 comments

Oil spiked higher on Monday, driven by a struggling dollar, swirling speculation over an Italy bailout, upbeat US data and geopolitical tensions in the crude-rich Middle East, traders said.

New York's main contract, light sweet crude for delivery in January jumped $3.38 to $100.15 a barrel.

Brent North Sea crude for January delivery soared $2.61 to $109.01.

"Oil prices are increasing significantly as the week begins," said Commerzbank analyst Carsten Fritsch.

"Prices are finding support from a weaker US dollar, rumours of ... (an) IMF loan for Italy and robust US retail sales figures over the Thanksgiving weekend, which is having a positive impact on market sentiment."

European stocks and the euro were up sharply on Monday largely on a report that the International Monetary Fund was in talks with Italy about a package to prop up the indebted country, traders said.

The IMF denied the rumour but this did not stop major European indices rallying more than 3.0 percent and the euro rebounding back above $1.33.

A weaker US unit makes dollar-denominated crude cheaper for buyers using other, stronger currencies. In turn, that tends to boost oil demand and prices.

Markets were also keeping a close eye on Iran, which is the second biggest OPEC oil producer after kingpin Saudi Arabia.

EU nations were expected to unveil more sanctions against Iran at a foreign ministers' meeting on Thursday after a report by the UN atomic energy watchdog charged that Tehran was stepping up efforts to obtain nuclear weapons.

France has called for a freeze on Iranian central bank assets and an embargo on Iranian oil.

Britain unveiled new sanctions on Iran on November 14, in conjunction with similar measures by the United States and Canada.

"For this week, the main geopolitical watch will be on Iran and whether France is able to push for an EU-wide ban on Iranian crude oil imports," said PetroMatrix analyst Olivier Jakob.

"Each European country taken in isolation could afford to live without Iranian crude oil but when taken together, the amount of crude oil that Europe imports from Iran is very significant."

© 2011 AFP

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