💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

UPDATE 11-Brent falls as euro zone woes, dollar pressure

Published 06/24/2011, 04:09 PM
BARC
-
GC
-
CL
-
NYF
-
BIG
-

* Brent/U.S. crude price spread narrows

* Dollar index strengthens, helps pressure oil

* Coming up: API oil data at 4:30 p.m. EDT Tuesday (Recasts, updates Brent prices, market activity)

By Robert Gibbons

NEW YORK, June 24 (Reuters) - Brent crude prices fell 2 percent on Friday as Europe's debt problems and a dollar index rebound extended oil's decline a day after consuming nations announced they were tapping strategic reserves.

Dropping 7 percent for the week, Brent's premium to U.S. crude fell below $14 a barrel intraday, from above $19 on Wednesday, the day before the International Energy Agency made a surprise announcement to release oil from strategic reserves. The premium has contracted from its record $23.34 reached on June 15.

U.S. crude ended slightly higher on Friday, after seesawing and briefly dipping below $90 a barrel, finding support above Thursday's low trade.

The euro fell versus the dollar as investors worried that Greece's parliament may not pass austerity measures needed for the country to secure more bailout funds.

"The strengthening of the dollar index is helping pressure oil and we're seeing an unwinding of the Brent-WTI spread because of the release of the strategic reserves," said Phil Flynn, analyst at PFGBest Research in Chicago.

"The Brent-WTI spread coming in indicates that the release was justified," he added.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Analysis-Self-regulation for oil futures [ID:nL6E7HO1GB]

Column-IEA stock release crushes Brent spreads [KEMP/]

Analysis-OPEC, IEA clash over oil reserves [ID:nLDE75M1DM]

Obama's oil reserves plan took shape in May[ID:nN1E75M214]

Graphic package on reserves: http://r.reuters.com/xew32s

RSI graphic:http://graphics.thomsonreuters.com/gfx/MR_20112406143841.jpg

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

ICE Brent crude for August fell $2.14 to settle at $105.12 a barrel, after swinging between $103.62 and $108.70 after the previous session's nearly 6 percent slide. It was a second straight weekly loss for the contract.

Brent trading volumes were heavy, eclipsing U.S. crude for a second straight day, after hitting a record over 1.2 million lots on Thursday.

The consuming nations' reserves release sent Brent into contango, with front-month Brent ending at a 19-cent discount to the September contract, after closing Thursday at a 21-cent premium to the second month.

U.S. August crude edged up 14 cents to settle at $91.16 a barrel, but front-month crude posted a third straight weekly loss, down 2 percent.

Money managers slashed their net-long U.S. crude futures and options positions in both New York and London in the week to June 21, the Commodity Futures Trading Commision said on Friday. [ID:nEMS403FXX]

The relative strength index for both Brent and U.S. crude approached the 30-point mark, a signal that a contract has been oversold, following the sell off IEA announcement, although WTI edged up slightly up after the late day price rally.

U.S. gasoline futures settled lower, losing 2.1 percent, with heating oil , the distillate benchmark, ending 1.1 percent lower.

U.S. refined products prices had been reacting to pricier Brent crude futures in recent months.

IEA RESERVE RELEASE IMPACT

The International Energy Agency (IEA) announced on Thursday a release of 60 million barrels of government-held stocks over the next 30 days.

Leading commodities banks JP Morgan and Goldman Sachs cut their oil price forecasts following the IEA announcement, but Bank of America Merrill Lynch kept its forecast for the second half unchanged at $102 a barrel. [ID:nL3E7HO01S]

Saudi Arabia, the world's leading crude oil exporter, has yet to make any comment on the release.

The IEA move came after the Organization of the Petroleum Exporting Countries last month could not reach agreement on a boost to production targets. But Saudi Arabia had pledged to increase output to meet demand.

"Saudi Arabia will be crucial -- will it stick to its promise to increase its output to 10 million barrels a day or not?" said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

"If they don't, then the IEA decision will have backfired. Maybe they will scale back production in July after this stock release."

U.S. Treasury Secretary Timothy Geithner said on Friday that the IEA's decision was "sensible policy."

"It will provide some modest help and relief" to the U.S. economy, Geithner told reporters after meeting local business leaders in Manchester, New Hampshire. "It was a prudent use of existing reserves."

Better-than-expected U.S. durable goods data provided support to U.S. crude futures in the early going on Friday.

New orders for U.S. manufactured goods in May increased 1.9 percent after dropping 2.7 percent in April, the Commerce Department said. [ID:nN1E75N087]

But concerns about euro zone debt problems continued to weigh on markets. U.S. stocks headed for three days of losses as worries about the Italian banking sector added to the uncertainty over the passage of a Greek austerity plan. [.N] (Additional reporting by Gene Ramos in New York, Claire Milhench and Ikuko Kurahone in London and Alejandro Barbajosa in Singapore; Editing by Lisa Shumaker and David Gregorio)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.