World oil prices tread water

18th October 2010, Comments 0 comments

Crude oil prices steadied in cautious trading on Monday, ahead of fresh US economic data, and as the under-pressure dollar made some modest gains against the euro, analysts said.

New York's main contract, light sweet crude for delivery in November, eased eight cents to 81.17 dollars a barrel.

Brent North Sea crude for December added seven cents to 82.52 dollars in early afternoon London deals.

"The market conditions continued to remain fairly uncertain, as crude oil prices ... remained fairly steady above 81 dollars per barrel, struggling for some direction," said Sucden analyst Myrto Sokou.

"Today, investors will be watching for the US industrial output and capacity utilisation data for September that could provide the market with an insight about the strength of the US manufacturing sector.

"However, the key element for the direction of the oil market will continue to be the US dollar movements."

The dollar rebounded strongly against the euro on Monday as investors adjusted positions after the common currency had reached the highest level for almost nine months, dealers said.

In London trade, the euro dropped to 1.3855 dollars from 1.3973 dollars late in New York on Friday, when it had soared as high as 1.4159 -- which was last seen in late January.

Despite the dollar's slim gains, the greenback will likely remain under pressure after US Federal Reserve chairman Ben Bernanke said Friday the central bank was ready to ramp up extraordinary measures to revive the economy.

A weak greenback makes dollar-denominated commodities like oil cheaper for buyers holding rival currencies, thereby boosting investor demand. When the dollar strengthens, the opposite occurs.

Crude oil had briefly topped 85 dollars last week, helped by data showing surprisingly strong global energy demand, before slipping on profit-taking.

Traders also digested OPEC's decision to maintain its output target, alongside news of a surprise drop in US crude reserves.

The Organization of Petroleum Exporting Countries (OPEC) left its official oil production ceiling unchanged on Thursday, in line with expectations in the face of an uncertain economic outlook, after a meeting in Vienna.

OPEC, which pumps 40 percent of the world's oil, agreed to keep its target at 24.84 million barrels a day.

© 2010 AFP

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