Brent crude rises above $105 on euro zone hopes

LONDON: Brent crude oil rose more than $1 per barrel on Thursday as the dollar eased and as hopes rose that European leaders would organise an effective response to the euro zone debt crisis.

German Chancellor Angela Merkel faced a key vote in parliament on Thursday on new powers for the European Financial Stability Facility (EFSF). The bill was expected to pass.

The euro rose while the dollar fell around 0.5 percent against a basket of currencies.

Brent futures for November rose $1.73 to a high of $105.54 per barrel before easing slightly to trade around $105.05 by 0828 GMT. Brent was poised for a monthly drop of more than 8 percent and a decline of about 6.5 percent this quarter.

US crude oil futures rose to a high of $82.46, up $1.25 per barrel. The contract has fallen about 14 percent this quarter, the worst drop since the last quarter of 2008.

"Relief that funds for euro bailouts will be made available are supporting markets," said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt. "There were some suggestions that support for action would not be forthcoming."

But the general outlook for oil and economic growth was less positive with slowing global output and the prospect of declining fuel consumption weighing on the market.

Morgan Stanley has slashed its forecast for Brent by $30 to $100 a barrel for 2012, citing rising output from Libya and the weak economic outlook as negative factors.

Brent should drop to $100 by the end of 2011, and could drop as low as $85 a barrel in the first half of next year before tighter balances and slow growth send Brent closer to $110, the bank said in a research note released on Wednesday.

Before it adjusted its forecast lower, Morgan Stanley and Goldman Sachs had been among the most bullish of the major banks, forecasting a price of $130 a barrel for 2012.

Copyright Reuters, 2011