Wednesday, August 08 07:37:31
Brent crude dipped today, coming off a 12-week top hit in the previous session, although worries about falling North Sea output and hopes for more stimulus measures from both sides of the Atlantic kept prices above $111 per barrel. Optimism that world's largest economies -- the United States, China and the European Union -- will implement more measures to stimulate global growth increased investors' appetite for riskier assets and pushed up equities.
Brent crude fell 40 cents to $111.60 by 0404 GMT after touching a 12-week intraday high on Tuesday in its third straight day of gains. U.S. crude was at $93.30, down 37 cents. It settled at its highest since May 15 in the prior session, partly supported by a fire at a U.S refinery. "There's been a reassessment of risks in recent days," said Ric Spooner, chief market analyst from CMC Markets in Sydney. "Mr Draghi's recent comments in the eyes of the market has reduced the probability of a near term crisis in Europe." European Central Bank President Mario Draghi said last week that the bank may again start buying government bonds, but details of how it will stabilise the bloc's bond markets have yet to be fleshed out.
In the United States, a top Federal Reserve official said on Tuesday the central bank should launch another bond-buying program of whatever size and duration is necessary to get the economy back on its feet while China pledged on Sunday to intensify its monetary policy fine-tuning in the second half of this year. Brent broke on Tuesday a strong resistance at $111.28, the 200-day moving average, with supply of crude that underpins the Brent contract expected to drop to a record low in September. "The loading programme for North Sea crude is very low so the front-month Brent spread has firmed," Yusuke Seta, a commodity sales manager at Newedge Japan said, adding that $115 will be the next target for Brent.
The price spread between September and October Brent contracts widened to more than $1.60, up from a backwardation of $1 last week, pointing to strong prompt demand. "Last night we had a fire at Chevron's refinery which caused gasoline prices to surge and crude followed," Seta said. Chevron Corp sought to repair the core of its Richmond refinery on Tuesday, the second-largest in California, after an hours-long fire caused regional gasoline prices to spike on worries that it could be down for months.
Oil could find more support from a hurricane threat and if crude inventories in the United States -- the world's top oil consumer -- fell more than expected last week. Hurricane Ernesto is forecast to reemerge Wednesday in the southern Gulf of Mexico, where state oil company Pemex has port facilities and offshore platforms. U.S. crude stocks fell sharply by 5.4 million barrels last week, well above analyst expectations for a 300,000 barrel drawdown, the American Petroleum Institute said, ahead of government data due later today.
Continuing tensions in the Middle East are also helping to keep a floor under oil prices. Western sanctions have curbed crude exports from Iran, while Syria's embattled President Bashar al-Assad won a pledge of support from Iran as his forces tried to choke off rebels in the northern city of Aleppo. ( C ) Reuters