Oil prices rebound from recent slump

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World oil prices rebounded on Thursday after an overnight slump that was sparked by heightened concern over the eurozone debt crisis, the stronger dollar and OPEC's decision to hold output, analysts said.

In midday trade, the price of Brent North Sea crude for delivery in January added 55 cents to $105.57 a barrel.

New York's main contract, light sweet crude for January, won 37 cents to $95.32 per barrel.

"Today's price move is just a correction on yesterday's losses," said Sucden Financial analyst Jack Pollard. "We see a correction higher in tandem with a firmer tone in equity markets."

Prices had slumped on Wednesday as the EU crisis returned to cloud the market, while OPEC ministers embraced higher output without setting new quota rules.

"Crude futures joined in the broader commodity selloff yesterday, suffering from increased macro pressure and a continuous US dollar rally," said VTB Capital analyst Andrey Kryuchenkov.

"The market paid little attention to a US crude inventory draw, or indeed OPEC's regular policy meeting in Vienna on Wednesday."

The euro had plunged on Wednesday to an 11-month low at $1.2946 after Italy sold debt at the highest yield since the creation of the eurozone. The currency has since clawed back above $1.30 after a successful Spanish bond issue.

The stronger greenback makes dollar-denominated crude more expensive for buyers using weaker currencies, like the euro, and this tends to dampen oil demand and prices.

The Organisation of the Petroleum Exporting Countries said Wednesday that output will be maintained at 30 million barrels per day (bpd), acknowledging it had been consistently breaking its own quotas.

Excluding the production of Iraq -- which is not held to quotas -- OPEC output in November was about 11 percent, or more than three million barrels, above the official group total limit of 24.8 million bpd.

OPEC, whose 12 members produce about one third of the world's oil supply and include Saudi Arabia, meets periodically to set production levels.

"As OPEC decided to keep the production levels at 30 million bpd, the main focus has transferred to the ongoing debt crisis in the eurozone with ongoing concerns about the future of the European economies," added Pollard.

"Today, investors will be keeping an eye on the US employment data including the weekly jobless claims, as well as the NY Fed manufacturing index and the US producer prices, that could set the tone for the rest of the day."


© 2011 AFP

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