Oil prices rebounds on eurozone rescue plan

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World oil prices surged Monday as the euro recovered after a 750-billion-euro (one-trillion-dollar) EU-IMF rescue plan that is aimed at preventing the spread of the Greek debt crisis, dealers said.

New York's main contract, light sweet crude for June delivery, jumped 1.37 dollars to 76.48 dollars a barrel.

Brent North Sea crude for June soared 1.63 dollars to 79.90 dollars in late afternoon London trade.

"Global markets breathed a collective sigh of relief as the IMF and ECB announced wide ranging strategies to support the much-maligned euro," said Chris Hossain, senior sales manager at ODL Securities, in a note to clients.

"Oil rallied sharply as confidence returned that the global economic recovery may continue.

"The concerns over the state of the European economies have taken precedent over some good corporate and economic numbers coming out of the United States."

Oil had collapsed by more than 10 percent in value last week as the market was rocked by a stronger dollar, sliding stock markets and contagion fears about Greece.

However, prices rebounded sharply on Monday as the euro recovered on the back of a massive EU financial rescue package. That makes dollar-denominated crude cheaper for holders of the single currency, boosting demand.

Investors welcomed the European Union and International Monetary Fund aid package, agreed early Monday, to resolve the debt and budget deficit crisis that had threatened to engulf the eurozone.

The European single currency leapt above 1.30 dollars from 1.2755 dollars late Friday but slipped back to about 1.29.

Last week, New York crude fell from a 19-month peak of 87.15 dollars a barrel reached on May 3 on fears that the crisis in Europe could threaten the global economic recovery.

"In the short term, (the EU-IMF aid package) definitely gave confidence to investors," Clarence Chu, a Singapore-based oil trader with Hudson Capital, told AFP.

He said the deal may not be enough to stave off uncertainties about the health of other eurozone economies, but could lead to (New York) oil prices returning to more than 80 dollars during the week.

"I think prices definitely could go back up to around 80 dollars, but in general, people are not as optimistic as they were two weeks ago," said Chu.

"(The deal) just postpones the defaults because if they have a pile of money waiting, there is less incentive for them to cut down their budget deficits."

© 2010 AFP

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