Thursday, June 7, 2012
By Jacob Gronholt-Pedersen
Oil futures held above the psychologically important $100-a-barrel mark in Asian trading Thursday, with tensions surrounding Iran providing further support.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at $84.90 a barrel at 0706 GMT, down $0.12 in the Globex electronic session. July Brent crude on London's ICE Futures exchange fell $0.51 to $100.13 a barrel.
Brent crude rose overnight on the back of expectations that central banks around the world could inject more stimulus to boost growth and after the head of the European Central Bank, Mario Draghi, said markets were underestimating political leaders' commitment to addressing the euro crisis. The comments were taken as a positive sign by investors, pushing the contract to a high of $101.39 a barrel.
It has since slipped in tandem with the euro, which was at $1.2551 at 0705 GMT, down from a high of $1.2587 marked in New York after the ECB meeting.
The president of the Atlanta Federal Reserve Bank's comment that additional stimulus "certainly needs to be considered" also fueled hopes for a policy response to the slowing global economy.
Investors will watch for further easing clues to Fed Chairman Ben Bernanke's testimony on the U.S. economic outlook, due around 1400 GMT.
Given the recent selloff, oil prices could rebound quickly "if policymakers take steps to lift the fog of uncertainty that is dominating pricing dynamics," analysts at Goldman Sachs said in a note.
Oil prices were also pushed higher as investors turned their attention to escalating tensions between Iran and the West. Iran warned the European Union Wednesday that delays in holding preparatory meetings ahead of talks in Moscow next week could jeopardize the talks' success. Unsuccessful talks may trigger fears that tensions will disrupt oil supplies from the Persian Gulf region.
Market participants largely looked past a report on U.S. oil inventories that showed weekly stockpiles of crude were reduced by 100,000 barrels, less than the average analyst forecast of a 500,000-barrel drop in a Dow Jones Newswires survey.
The massive selloff of crude futures in recent weeks was mainly due to concerns that a slowing global economy would dent demand for oil. But analysts at Goldman Sachs predict that oil demand will outpace supply despite a slowdown in global economic growth. That should in turn push crude prices higher as the market emerges from the seasonally weak second quarter, they said.
"In our view, it is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supply," they said.
The bank recommends a long position on September 2012 Nymex oil futures at an initial value of $107.55 a barrel.
Nymex reformulated gasoline blendstock for July--the benchmark gasoline contract--fell 125 points to $2.6778 a gallon, while July heating oil traded at $2.6594, 123 points lower.
ICE gasoil for June changed hands at $860.50 a metric ton, down $5.00 from Wednesday's settlement.
Write to Jacob Gronholt-Pedersen at firstname.lastname@example.org