Singapore: Oil climbed towards $81 on Friday after an agreement to create a safety net for debt-ridden Greece helped restore confidence among investors to buy riskier assets, including commodities.
The euro rebounded from 10-month lows after euro zone leaders together with the International Monetary Fund on Thursday agreed to provide Greece with coordinated bilateral loans if the Mediterranean nation faced severe difficulties.
US crude for May delivery rose for the first time in three days, gaining 37 cents to $80.90 a barrel at 11:45am, while ICE Brent climbed 37 cents to $79.98 in London.
Japan’s Nikkei average hit an 18-month high on Friday, while a day earlier the Dow and S&P 500 jumped to similar milestones following a report showing the number of U.S. workers filing for jobless aid fell sharply last week.
“The initial jobless claims was a very encouraging sign,” said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore. “If the number of unemployed people drops, it will be a big boost for oil.”
“And if something really concrete comes out of Greece, and people forget about Europe’s problems and the dollar comes back down, then oil could march higher,” Chu said, adding that for now he expects prices to trade between $80 and $83.50.
The European-IMF agreement for Greece included no numbers, but a senior European Commission source said the support package would be worth 20-22 billion euros ($27-29 billion) if required in an emergency.
“Most people think the bailout is a done deal, but I think it is still in the air,” Chu said. “The IMF has had to step in because they can’t agree on one thing.”
Oil prices were, however, little changed from last Friday as a larger-than-expected increase in US crude inventories offset declining stockpiles of gasoline and distillates.
Investors have mostly focused on currency movements and the speed of economic recovery as a cue for commodity price movements this week. Gold also rose today as the euro rebounded.
US oil demand grew 3.6% last week. But demand in Europe weakened sharply in January, down by 1.55 million barrels per day from a year earlier, Barclays Capital said earlier this week, citing data published by the Joint Oil Data Initiative.
“The whole demand picture is not that strong,” Hudson’s Chu said. “It has improved from a year ago, but it is still very weak.”
Oil inventories at Cushing, Oklahoma, the key US crude oil hub, rose by 754,739 barrels to 31.8 million barrels in the week to 23 March, according to a report from energy industry data provider Genscape released on Thursday.
“Fundamentals really don’t support prices at these levels,” Chu said. “But the whole feeling is that oil is very resilient, and it doesn’t want to go lower.”