Friday, November 11, 2011

Brent steady above $113; eyes euro zone debt

SINGAPORE (Nov 11): Brent crude was steady above $113 a barrel on Friday, after sharp gains in the previous session, as lingering concerns over Europe's debt crisis prompted investors to stay cautious.

Brent crude lost 16 cents a barrel to $113.55 by 0312 GMT, after settling Thursday up $1.40 at $113.71. U.S. crude traded 36 cents higher at $98.14 a barrel, after closing up $2.04 at $97.98, a 15-week high of $97.98.

Oil prices rebounded on Thursday on progress in Italy's efforts to solve its debt problems, but the lack of a concrete plan to tackle the crisis has capped gains in riskier assets, analysts said.

"We had some good news yesterday from Italy on their bond sale, but the oil market is trading from headline to headline," said Ben Le Brun, market analyst at OptionsXpress in Sydney. "Right now there's not enough to give investors a clear direction for prices."

Asian shares rebounded modestly and the euro clung to tentative gains after debt-ladened Italy was able to fund itself at a bond auction.

The prospect of Italy buckling under its 2 trillion euro debt load has raised fears over Europe's 2-year-old crisis to a new level, because the euro zone's bailout fund is not big enough to rescue the bloc's third largest economy.

Positive economic data out of the United States also supported prices, as new claims for unemployment benefits fell last week to their lowest level since early April, and the trade deficit unexpectedly shrank in September.

Brent is poised to end the week flat, after two straight weeks of gains, while U.S. crude is headed for a 3.6 percent weekly rise, its sixth consecutive gain.

Technical charts show Brent oil is expected to revisit the previous trading session's low of $111.30, while U.S. oil faces strong resistance at $98.91 per barrel that may end a rally that started from the October low of $74.95, Reuters market analyst Wang Tao said.


Market participants continue to monitor developments in the Middle East and North Africa for signs of changes to global crude supply.

The European Union may impose new sanctions against Iran within weeks, after a U.N. agency said Tehran had worked to design nuclear bombs, EU diplomats said. [ID: nL5E7MA1UQ]

In Libya, acting prime minister Ali Tarhouni said oil output will easily exceed 700,000 barrels per day (bpd) by January and return to prewar levels by about June.

Despite the market's focus on macroeconomic issues, oil fundamentals remain firm, underpinned by tight supplies and the prospect for further disruption to output, analysts said.

"Physical oil supplies have tightened, and geopolitical risks in the Middle East, particularly concerning Iran's nuclear program, have escalated," analysts at Barclays Capital said in a research note.

On the demand side, global oil consumption will be a bit lower than expected this year and next as economic slowdown and high prices curb consumption but the oil market is strong and supply remains tight, the International Energy Agency (IEA) said on Thursday. ' Reuters


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