London: Oil rose on Tuesday, with Brent crude up by more than $2 to exceed $106 a barrel, as fresh measures discussed by the European Central Bank (ECB) curbed anxiety about European debt.
Officials said Europe’s stability fund could be increased, indicating the ECB was prepared to act to prevent a meltdown in Greece and fight the crisis threatening to derail the global economic recovery.
Oil rebounded with other commodities as stock markets jumped and the dollar weakened. Brent swung to as high as $106.19 a barrel on Tuesday, from an intraday low of $101.66 a barrel the previous session.
“Much of the immediate action in oil is simply based on the same climate of economic fear that is battering all other asset classes, which then creates a cascading effect involving technical triggers, precipitous price falls and a disregard for the underlying fundamentals,” said Barclays Capital analysts in a research note.
Brent futures were up $1.86 to $105.80 a barrel at 2:19pm, while US crude was up $2.44 at $82.68 a barrel.
Brent and US oil prices were both recovering from seven-week lows last week, when both crude contracts posted weekly losses of more than 7% and 9%, respectively.
“Clarity on the euro zone plan is still key. Crude prices are swinging back and forth depending on what comments come out of Europe,” said Victor Say, an analyst with Informa Global Markets in Singapore.
“Commodities have also been boosted by a weaker dollar and short-covering after the recent sell-down.”
WATCH AND WAIT
Oil production is climbing in Libya, where Eni said output at its Abut Attifel field 300 km south of Benghazi had restarted at around 31,900 barrels of oil per day, just over half its pre-civil war rate.
And at Mellitah in Libya, a tanker was preparing to sail with a cargo of condensate, and another was expected to load crude oil from the port later this week.
But violence continued in Syria, where oil exports of around 150,000 bpd have ground to a halt because of international sanctions.
Four soldiers were shot dead on Monday as they tried to escape a military camp, and a crackdown in the region of Homs continued, where an increasing number of defectors have been organising and mounting raids.
Attention is also focused on weekly US inventory data, with commercial crude stockpiles expected to have dipped slightly, according to a preliminary Reuters poll of analysts on Monday, following last week’s precipitous 7.34 million barrel drop.
The decline sent inventories to the lowest level since January. Product inventories instead are expected to have edged higher. Data from the American Petroleum Institute is due at 2:00am.