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Oil rises above $82 as Eurozone concerns ebb

Oil rises above $82 as Eurozone concerns ebb
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First Published: Mon, Nov 22 2010. 09 18 AM IST
Updated: Mon, Nov 22 2010. 09 18 AM IST
Singapore: Oil on Monday rose to above $82 a barrel, rebounding from two straight weeks of losses, as the dollar weakened after Ireland sought an international bailout to tackle its banking and budget crisis.
The euro, most Asian stocks and commodities got a fillip as optimism over the bailout outweighed concerns of tighter monetary policies in China, world’s second largest energy consumer, to fight inflation.
US crude for new front-month January delivery rose 53 cents to $82.51 a barrel at 0254 GMT, after the expired December contract suffered the largest percentage decline since the week to 13 August. January ICE Brent was up 56 cents to $84.90 a barrel.
The actual share of fundamentals is still only about 50%, with financials still playing a big part in oil price movements, Fredreic Lasserre, global head of research for commodities at Societe Generale told Reuters in Singapore.
Commodities remain a good hedge against long term inflation, Lasserre said.
The US dollar index fell below major support around 78.27-37 to 78.14, down 0.5% on the day, on Ireland’s rescue deal. A weaker dollar makes oil cheaper for holders of other currencies.
The market also shrugged off the impact of tightening monetary policies in China after it raised bank reserve requirements and Hong Kong imposed measures aimed at curbing rising property prices.
“They want to cool the market which is good for the economy,” said Ken Hasegawa, commodities derivatives sales manager at Newedge Japan. “It’s a strategy to prevent inflation. They really want to grow gradually.”
An improving supply-demand situation in the US, as economy of the world’s largest energy consumer gradually picks up, will also support oil prices, Hasegawa said.
“US inventories are getting lower especially for gasoline and distillates,” he said, adding that they have fallen below last year’s levels.
Societe Generale’s Lasserre said there is still a “slight surplus in the market now.”
He expects to see inventories down to 55 days and the market to be in backwardation by the third quarter next year.
However, Newedge’s Hasegawa remained concerned that oil may fall below $80 on profit-taking at the end of the year.
“I’m looking at whether long-position holders will really liquidate their positions towards the end of the year.”
Money managers cut net long crude oil positions on the New York Mercantile Exchange from record high levels in the week through 16 November, the Commodity Futures Trading Commission said on Friday.
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First Published: Mon, Nov 22 2010. 09 18 AM IST
More Topics: Oil | Crude | Energy | Dollar | Markets |