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Markets

Oil off 3-week high as dollar rises

LONDON : Brent crude hovered near three week highs on Tuesday, buoyed alongside stocks by a landmark bank merger deal in
30 Aug 2011

 LONDON: Brent crude hovered near three week highs on Tuesday, buoyed alongside stocks by a landmark bank merger deal in Greece and strong data from the United States that allayed fears the world's top oil consumer was sliding back into recession.

Brent rose for a sixth straight session in early trading on Tuesday to as high as $112.36 before paring gains mainly due to a stronger dollar to trade 38 cents down at $111.50 at 0920 GMT.

US crude was down 49 cents to $86.78.

"Financial assets are the main driver for oil now... It depends very much on the stock market sentiment today," said Carsten Fritsch from Commerzbank.

He said oil pared some gains as the dollar index to a basket of currencies strengthened by 0.5 percent.

Stock markets rose as much as 2 percent with money switching back to riskier assets after US data showed consumer spending in the world's largest economy rose at its fastest pace in five months in July.

"Investors are expecting more monetary easing policies from the United States and that's why money is coming back into equities," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments.

"As long as equities are improving, oil will be in better shape."

In Europe, a merger between two Greek banks gave a much needed capital boost to a sector battered by the country's severe debt crisis that has threatened to spread through the euro zone.

Markets were also keeping an eye on the US crude inventory, which probably rose last week on continued inflows from the Strategic Petroleum Reserve and evacuations forced by Hurricane Irene, a preliminary Reuters poll showed.

Analysts expect crude inventories in the week to Aug. 26 to have risen by 1.2 million barrels while gasoline stocks may have dropped by 1.4 million barrels and distillate stockpiles are expected to have risen 1.1 million barrels.

US refiners and energy companies on Monday began to restore operations disrupted by Hurricane Irene over the weekend. One refinery was heard to have suffered damage to a crude unit due to flooding, while another remained shut.

LIBYAN SUPPLIES

Italy's Eni SpA signed a deal with Libya's rebel government on Monday aimed at quickly restarting its oil and gas operations in the country following concerns it could lose its dominant position to rivals.

A spokesman for Libya's Arabian Gulf Oil Company (AGOCO) told Reuters earlier that it planned to restart production at two eastern oilfields in mid-September and resume shipping oil from Tobruk by the end of the same month.

"Prices could also soften with the reinstatement of Libya's new government after the downfall of Gaddafi's regime and announcements they would restart production at two eastern oilfields in mid-September and resume shipping oil by the end of the month," ANZ analysts said in a note.

"But with the focus on risks to global growth, oil prices are likely to be led by moves in financial markets," they added.

 

Copyright Reuters, 2011