Daily Comments
Oil pares gains as Wall Street slips
27.01.2012 11:04:00
Brent crude for March delivery was up 82 cents at.USD 110.63/bbl, after hitting an intra-day high of USD 111.89. NYMEX crude was up 20 cents at USD 99.60/bbl, after having touched a session high of USD 101.39 early. Brent's premium against U.S. crude widened to around USD 11.20/bbl, up from USD 10.41 on Wednesday.
Oil prices pared gains in late trading Thursday as the dollar recouped some losses, erasing much of the day's advance that was spurred by the Fed’s pledge on Wednesday to keep interest rates low well into 2014.
Crude futures took its cue from Wall Street, where a rally petered out in the wake of downbeat home sales data and jobless claims, part of a mixed set of US economic data that raised red flags among oil investors early in the day.
The outlook for crude supplies also capped prices. Extra crude from Saudi Arabia, Iraq and Libya should make up for any Iranian oil lost through sanctions against Tehran for its disputed nuclear program.
In addition, unabated concerns over the health of the European economy stoked pressure as Greece's critical debt-restructuring negotiations with private lenders entered a new phase. The focus now is on the size of the haircut which the European Central Bank and other public creditors may need to take in order to make the country’s debt load sustainable.
On the currency front, the US dollar was down 0.21% against a basket of currencies, with the euro turning negative against the dollar. In early trading, the euro hit a five-week high against the greenback.
Meanwhile, Iranian President Mahmoud Ahmadinejad said the EU, rather than his country, stands to lose most under the new sanctions aimed at banning the import of Iranian oil by July 1. These remarks came as Iranian lawmakers said they might cut supplies to the EU ahead of the July deadline. The EU move, plus new US measures aimed at making it harder for countries to buy oil from Iran, constitute the toughest sanctions yet aimed at pressuring Tehran to curb its nuclear program.
In a keynote address to the annual World Economic Forum in Davos, Switzerland German Chancellor Angela Merkel, deflected pressure for Berlin to ramp up rescue funds, claiming the solution to the crisis was to restore lost trust in governments' policies and closer European integration.
Moving forward, we think the market has tested a recent low and is back towards the mid-top range, with Brent trading slightly above the USD 100 mark and WTI likely to test the 100 mark again today. Headway or a breakthrough in the Greek talks could trigger another rally in the oil market.
