Monday 1 August 2011

Oil price hike, again!



Oil prices climbed as a tentative resolution to the U.S. debt ceiling crisis eased concerns about a potential credit downgrade or default for the world's largest oil consumer.
Delays to seven August-loading cargoes of North Sea Forties crude, the main component of the benchmark for over half the world's oil, were also supporting Brent futures. At one point, the European benchmark had climbed 3.1% to hit a 6½-week high of $120.40 a barrel, but quickly pulled back.
Ahead of the New York day, the front-month September Brent contract on London's ICE futures exchange was up $2, or 1.7%, at $118.74 a barrel. The front-month September contract on the New York Mercantile Exchange was up $1.22, or 1.3%, at $96.92 a barrel.

Brent September crude broke through $120 as U.S. President Barack Obama said Sunday that leaders of both parties had reached an agreement to lift the debt ceiling and reduce the federal deficit.
Both the U.S. House and Senate are expected to meet Monday to discuss the details of the plan, which calls for increasing the debt ceiling by at least $2.1 trillion through the end of 2012, along with $2.4 trillion deficit reduction measures.
Strong resistance is seen at $120 a barrel for Brent as prices above that level start to take a real toll on demand and would require much stronger sentiment on the pace of economic recovery, analysts said.
"We still cannot find the catalyst that would provide a strong argument to buy crude oil above $120 a barrel," said Petromatrix managing director Olivier Jakob.
The rise in Nymex crude, meanwhile, was less spectacular, with some analysts saying a potential deal on the U.S. debt ceiling had already been priced in.
Worries over the health of the U.S. economy, and consequently its oil demand, also served to cap prices after last week's shock revision to U.S. first-quarter gross domestic product growth and a lower-than-forecast second quarter figure remained in the spotlight.
Also, oil companies said they resumed around half of the oil and natural-gas production that had been shut down in the U.S. Gulf by Tropical Storm Don as the weather system blew ashore in south Texas.
However, the Nymex contract could move higher once trade gets going in the U.S., Andrey Kryuchenkov, vice president of commodities research at VTB Capital, said.
Meanwhile, Brent crude's premium to Nymex crude widened to $22.64 a barrel, not far off a high of $23.45 a barrel set July 14.
Source: wsj

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