London: Brent crude oil fell more than $1 per barrel to $111 on Friday as investors took another look at the details of a financial rescue plan for the euro zone, which has helped boost oil prices this week.
Stock markets headed for their best week in over two years on Friday, bolstered by EU leaders’ efforts to contain the euro zone debt crisis which have stoked appetite for riskier assets, while the euro held just below a seven-week high.
But oil, which has jumped since the plan was agreed on Thursday, pared recent gains with both Brent and US light crude oil slipping more than $1 per barrel.
By 03:00 pm, the benchmark December Brent contract was down $1.08 per barrel at $111.00, having reached an intra-day low of $110.95. The contract was still up almost 5% on the week.
US crude fell $1.45 to a low of $92.51 but was still headed for a weekly rise of around 6%, its biggest weekly gain since March.
Euro zone leaders are now under pressure to finalize details of their plan to slash Greece’s debt and strengthen the European Financial Stability Fund (EFSF), possibly through investment by emerging economies such as China and Brazil.
“After a rally like we saw yesterday it was reasonable to see oil prices fall,” Torbjorn Kjus of DNBNor said.
“There was a bit of euphoria yesterday based on the EU meeting and when you look at it wasn’t that strong a package. It was a moderate package so it was a little bit surprising to see so much of a rally.”
“The rise was a bit of a relief really, but the banks will need to boost their reserves in line with the 9% core capital requirements, which means harder access to money for companies and lower economic growth,” he added.
Christophe Barret of Credit Agricole said: “Perhaps prices went too high, we are still lacking a lot of detail on the euro zone deal.”
On Thursday, European leaders struck a deal with private holders of Greek debt to write down half their holdings and agreed to boost the region’s rescue fund.
US President Barack Obama said the deal had calmed global markets and it was now important the countries follow through on implementation of the pact.
The FTSEurofirst 300 index of leading European shares was up 0.15% in early trade. The benchmark index is up around 10% so far this month and on track for its biggest monthly rise since April 2009, though it is still down 9% for the year.
Data this week has been positive, with the US economy growing 2.5% in the third quarter, its fastest pace in a year, and an index of China factory output returning to growth after three months of contraction, boosting global demand for oil.