SINGAPORE: Brent crude held above $114 on Monday, extending the gains of the previous week on hopes of steady demand growth as concerns over Europe's debt crisis eased, with Italy and Greece putting in place new governments to shore up the countries' finances.
Most markets, from Asian stocks and the euro to precious metals, rose in hopes the new leaders will push through reforms and austerity measures to save their nations from bankruptcy and fend off a wider financial meltdown. Oil also gained on concerns the crisis over Iran's nuclear programme will worsen.
Brent crude gained 19 cents to $114.35 a barrel by 0231 GMT, after rising to as much as $114.83. US oil traded 18 cents lower at $98.81, after touching $99.69, the highest since July. On Friday, the US benchmark closed at a 15-week high and posted a sixth consecutive weekly gain, while Brent pushed higher for a third straight week.
"US crude prices have a further upside towards $102 this week, based on technicals and support from developments in Europe," said Ken Hasegawa, commodity derivatives manager at Newedge Brokerage in Tokyo. "We have already seen a big rebound in US crude of about $25 a barrel since the low they touched in October."
The US benchmark had slipped to $74.95 on Oct. 4, the lowest this year, and the contract has rebounded 32 percent since then. Hasegawa expects prices to correct to about $95 a barrel as investors may book profits after they touch $102.
The spread between Brent and US crude will remain at the current level of about $15 for the rest of the year on steady demand for grades linked to the European benchmark even as output improves in North Sea and Libya, he said.
Brent is expected to fall to $111.30 per barrel, a low touched on Nov. 10, as a downward wave "c" will develop, while US oil may either hover around a strong resistance at $98.91 per barrel or retrace to $97, says Reuters technical analyst Wang Tao.
EUROPE RESCUE
Technocrat leaders in Italy and Greece are rushing to form governments to limit further damage to their countries from the euro zone debt crisis. Italy's president asked former European Commissioner Mario Monti to form a government in an economy whose debt burden is too big for the euro bloc to bail out.
In Greece, Lucas Papademos took office on Friday. The former central banker who oversaw his country's entry to the euro zone in 2002 must win a Wednesday confidence vote in his cabinet before meeting euro zone finance ministers in Brussels on Thursday.
"The appointment of new leaders who are experienced economists in both countries provides some light at the end of the tunnel," Ric Spooner, chief market analyst at CMC Markets, said in a report.
"There is a better possibility of economic reforms to improve the efficiency and competitiveness of both the Greek and Italian economies and provide a platform for growth over the medium to longer term."
On the supply front, investors remain worried about the crisis in the Middle East over Iran's nuclear programme getting out of hand.
US President Barack Obama said he and Russian President Dmitry Medvedev discussed Iran, among other topics, in their meeting on Saturday. Obama said he and Medvedev "reaffirmed our intention to work and shape a common response so we can move Iran to follow its international obligations when it comes to its nuclear program."
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