Tuesday, 27 November 2012 16:48
LONDON: Oil steadied near $111 per barrel on Tuesday, supported by a bailout payments deal for Greece although worries over a looming US fiscal crisis kept a lid on gains.
Optimism spread throughout financial markets, with the euro rising and European shares at a near three-week high after global lenders clinched a deal to reduce Greek debt and disburse the country's next aid instalment.
Brent crude was off 8 cents at $110.84 a barrel by 1033 GMT, having reached a high of $111.36 in earlier trade. US crude was up 5 cents to $87.79.
"This serves to increase risk appetite, which should attract investors to the oil market," Commerzbank analysts wrote in their morning report.
Oil dealers cautioned that price gains may be limited due to the fragility of the world economy. The OECD cut its global growth forecasts, warning that the debt crisis in the recession-hit euro zone is the greatest threat to the world economy.
The Organisation for the Economic Cooperation and Development urged central banks to prepare for more exceptional monetary easing if politicians fail to come up with credible answers to the debt crisis.
Market attention was expected to focus on the fiscal policy standoff in the United States. A lack of progress on that front will muddy the outlook for demand from the United States, the world's top oil consumer.
Republicans in the US Congress on Monday called on President Barack Obama to detail long-term spending cuts to help solve the country's fiscal crisis, while holding firm against the income tax rate increases for the wealthy that Democrats seek.
The oil market also kept an eye on the political crisis in Egypt that has triggered worries about supply.
Opponents of Egyptian President Mohamed Mursi will press ahead with a protest on Tuesday to demand the scrapping of a decree extending his powers, rejecting the Islamist's attempt to defuse a crisis that has brought violence back to Cairo's streets.
Traders also waited for weekly US inventory data due out on Tuesday and Wednesday. Analysts forecast a build in crude and refined product stockpiles for the week to Nov. 23.
Copyright Reuters, 2012