Tuesday, November 1, 2011

Oil prices slip; FOMC, G20 meetings eyed

PERTH (Nov 1): Oil prices slipped more than $1 on Tuesday on a stronger U.S. dollar, continuing uncertainty about the resolution of the euro zone's debt crisis and the collapse of MF Global Holdings.

The U.S.-based futures brokerage MF Global filed for bankruptcy protection following bad bets on euro zone debt. Its meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis and the seventh-largest bankruptcy by assets in U.S. history.

"As cooler heads prevail and look around and actually start analysing the euro zone situation, they realise we still got a ways to go," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.

"We are going to drift lower based on a correction from the euphoria from the EU summit last week until we get new news from either the FOMC, the G20, or finally on Friday, from the U.S. non-farm payroll."

Positive news from the U.S. Federal Reserve meeting ending Wednesday, the G20's mid-week summit, or U.S. payroll data on Friday could turn markets around, Nunan said.

"If the U.S. Federal Reserve comes out with some kind of indication that they are willing to do another round of quantitative easing -- that could easily get the market going again."

ICE Brent December crude fell $1.01 to $108.55 by 0738 GMT, after hitting a low of $108.27. Brent posted a 6.6 percent gain for October, biggest since April, and after slumping 10.5 percent in September.

U.S. December crude fell 1.19 cents to $92 per barrel, after touching a low of $91.77. U.S. crude surged 17.7 percent in October, the biggest percentage gain since May 2009.

On Monday, oil prices settled lower in thin trading, which brokers and analysts attributed to MF Global's collapse. The CME Group said it suspended MF Global as a member of the exchange.

A firm dollar also weighed on oil prices. The greenback pulled back from its three-month high against the yen as the impact of Japan's currency intervention waned, but was still stronger against a basket of currencies .


OPEC oil output fell in October as reduced supplies from Iraq, Nigeria, Saudi Arabia and Angola offset rising Libyan supply, according to a Reuters survey.

The International Energy Agency does not want OPEC to cut output at its December meeting because the IEA expects demand for OPEC oil will grow by half a million barrels per day in 2012 above the group's September output.

The IEA is also not looking to another release of emergency oil stocks as the global supply situation has changed from when inventories were released earlier this year, Richard Jones, deputy director of the agency told Reuters in an interview Tuesday.

Jones warned that oil prices above $100 per barrel are a threat to the global economy and current prices are already having an impact.

U.S. commercial crude oil stocks are forecast to have risen for the second consecutive time last week as imports continued to rebound, a preliminary Reuters poll of analysts found on Monday.

The industry group American Petroleum Institute's inventory report is due on Tuesday at 2030 GMT, with the U.S. Energy Information Administration's report following on Wednesday. - Reuters

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