London: Brent crude climbed above $106 a barrel on Friday as a pledge by the G-20 economies to preserve financial stability supported equities and the euro, and some investors saw the previous day’s slide to a six-week low as a buying opportunity.
Finance ministers and central bankers from the Group of 20 said they would take “all steps necessary” to calm the global financial system, helping the euro advance against the dollar and European shares to rise.
Brent crude was up $1.07 at $106.56 by 0854 GMT, after rising as high as $107.00 US crude gained 75 cents to $81.26 a barrel, after rising as high as $81.81.
“We’re seeing some stabilisation, some buyers coming in bargain-hunting,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. “It’s too early to say if prices have bottomed, given economic concerns.”
Oil has been under pressure over the past few days after the International Monetary Fund lowered its global growth forecast, followed by the US Federal Reserve’s warning of “significant downside risks” to the economy.
On Thursday, Brent lost $4.87 to settle at $105.49 on concern demand will fall as weak economic data from China and Europe triggered fears of a recession.
Brent is down nearly 5% for the week and was heading for its biggest weekly decline in just over a month and a half.
“It is just a short-covering rally that we are seeing today,” said Jonathan Barratt, managing director for Commodity Broking Services in Sydney. “Otherwise, the overall direction is weak. Oil has been moving in line with equities.
Despite the slump, JP Morgan maintained its price forecast of $115 a barrel for Brent for 2012, citing the prospect of supply curbs by Opec producers to prop up prices.
“As long as producers are prepared to trim output back to mid-2010 levels, we believe that Brent is likely to remain in a $100 to $120 per barrel range, and it would likely require a recession as deep as 2009 or those seen in the early 1980s to trigger a material downgrade,” the bank said in a report.
“A recession of that magnitude would necessitate a significant price adjustment.”
Opec Secretary General Abdullah al-Badri said this week the members which raised output to compensate for the shutdown of Libyan supplies will certainly reduce production as the North African country’s output recovers.