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Crude oil higher on joint bond speculation

Published 05/25/2012, 07:42 AM
Updated 05/25/2012, 07:44 AM
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Investing.com - Crude oil futures traded higher Friday, continuing to bounce from Wednesday’s seven-month low as traders speculated that joint euro-area bonds will be the solution to the euro zone’s debt crisis.

On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD91.01 a barrel during U.S. trade, adding 0.40%.

 Prices hit a high of USD91.31 and a low of USD90.21 a barrel during the session.

Lending support to crude oil, Italian Prime Minister Mario Monti stated, during a television interview, “Europe can have euro bonds soon. Germany has an interest in ensuring no country leaves the euro, while Greece will probably remain in the 17 – nation currency region even as anything can happen.” 

The EU summit ended yesterday with a plea to Greek voters to elect a pro - austerity governement on June 17 in order to keep the troubled island nation in the euro zone.

However, German Chancellor Angela Merkel left open a potential compromise on debt sharing via joint nation bonds in the euro area lifting hopes of cooperation.

Euro area finance ministers do not plan on meeting again until after the Greek elections next month, which potentially will determine Greek’s future in the euro zone. The Greek June election was called after a May 6 vote left no party able to form a government, as voter sent the anti-bailout Syriza party to second place.

Adding addition bullish pressure to oil, on Thursday reports surfaced that Iran has rejected proposals by six world powers, which include the U.S., the U.K., France, China, Russia and Germany, to curb its nuclear program. 

The Islamic Republic accused the West of creating a "difficult atmosphere" with its demands at talks in Baghdad earlier in the day. Despite the dead end, negotiations are expected to continue in Geneva in mid-June, according to the Iranian news agency Mehr.

Meanwhile, increasing bearish sentiment, a deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of the implementation of harsh austerity measures in Europe.

China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery rose 0.55% to trade at 107.16 a barrel, with the spread between the Brent and crude contracts standing at USD15.09.





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