Business

Brent tops US$120 on Iran, North Sea, Greece

February 17, 2012

NEW YORK, Feb 17 — Brent crude rose yesterday for a fourth day in a row, topping US$120 (RM367.20) a barrel at settlement — an eight-month high — on worries about supply from Iran and from the North Sea, where output was expected to dip next month.

The euro’s rebound against the dollar also boosted crude oil on both sides of the Atlantic.

The euro surged, reversing an early decline after reports that euro zone central banks had agreed to exchange Greek bonds they hold for new bonds as part of a deal to help the debt-strapped country. This raised hopes that Greece‘s long-sought debt bailout would be agreed by next week.

US crude erased an early US$1 decline and rose to a six-week high as upbeat data on jobless claims and housing brightened the outlook for domestic energy demand. The US data also helped lift Brent.

In London, ICE Brent April crude settled at US$120.11 a barrel, gaining US$1.18, or 0.99 per cent, the highest settlement for front-month Brent since June 14, when prices ended at US$120.16. The contract hit a session high of US$120.38, the steepest since an intraday high of US$120.40 on August 1.

In euro terms, Brent prices were the highest since 2008, according to Reuters data.   

US March crude closed at US$102.31, gaining 51 cents, the highest settlement since the January 4 settlement at US$103.22.

It hit a session high of US$102.69, the highest since January 12’s peak of US$102.98.

Implied volatility, as measured by the Chicago Board Options Exchange’s Oil Volatility Index settled near the day’s low of 33.99 per cent, after rising to 35.88 per cent following a slew of positive economic data.

Adding further support to crude, US gasoline futures rose to their highest level in 5-1/2 months, with front-month March RBOB hitting US$3.0514 a gallon before closing up 4.04 cents at US$3.0471a gallon.

A lower-than-expected gasoline stock build for last week shown in government inventory data released on Wednesday helped boost gasoline futures.

“Crude futures popped on the euro reversal to the upside against the dollar and the S&P 500 also rose,” said Addison Armstrong, senior director of market research at Tradition Energy in Stamford, Connecticut.

“US crude, though lagging Brent’s gains, is having a good run, considering where it was just days ago and with a lot of fundamental headwinds against it,” he added.

The April Brent-WTI spread widened to US$17.47 at the close, from US$16.79 on Wednesday.

The spread’s widening followed US government data on Wednesday showing a 2 million-barrel increase in stockpiles last week at the US delivery point in Cushing, Oklahoma. Supplies

at the hub rose to the highest level since September and the gain was the biggest weekly rise since December 2009.

Brent’s total trading volume rose 10 per cent from its 30-day average while US crude’s volume was down 9.4 per cent from its 30-day average, according to Reuters data.

US Data, Iran, North Sea

Initial US claims for unemployment benefits unexpectedly fell last week to near a four-year low, suggesting the labour market recovery was gaining steam, and housing starts rose more than expected in January.

Iran’s ambassador to Russia said plans to cut off supplies of Iranian crude to Europe would benefit only the Islamic republic, which in the past has been heavily dependent on imported fuel due to restricted refining capacity.

In another development, Iran, the world’s fifth-largest oil exporter, proposed an early resumption of a long-stalled nuclear talks with world powers, according to a letter from Tehran to European Union policy chief Catherine Ashton obtained by Reuters yesterday.

On Wednesday, oil prices jumped early after Iranian state television reported the country was halting its crude exports to six European countries before the EU ban on Iranian crude takes effect in July. This was later denied by Iran’s oil ministry, helping pare session gains.   

Crude oil output from the North Sea, home of the global Brent benchmark, is set to fall in March for a third month due to maintenance work and natural aging of oilfields there.

Supply will average 2.18 million barrels per day in March, down 1.4 per cent from 2.12 million bpd the previous month, data compiled by Reuters showed on Tuesday.

In early trading, crude oil futures dipped after ratings agency Moody’s warned it may cut the credit ratings of 17 global and 114 European financial institutions, a sign that impact of the euro zone debt crisis was spreading throughout the global financial system. — Reuters

 

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