London: Brent crude futures gained ground on Monday, after France and Germany said they would come up with a plan to contain the euro zone crisis, but details will not emerge until the end of the month.
Market sentiment improved after leaders Merkel and Sarkozy vowed on Sunday to develop a new plan to deal with Greece’s debt issues and recapitalise euro zone banks, although a break-down of the plan would not be available until the Cannes G-20 summit on 3-4 November.
Crude futures and the euro rose on the back of the news but equity markets adopted a more muted reaction.
“All that has happened is they’ve postponed the decision once more: they’ve kicked the can down to Cannes,” CMC markets analyst Michael Hewson said. “We’re slightly more positive but we’re not out of the woods yet.”
November Brent crude futures were $1 firmer at $106.88 a barrel by 1004 GMT. The contract posted an increase of 4.5% last week, its best performance since the week to 8 July.
US November crude led the gains and was up $1.21 at $84.19 a barrel, after hitting $84.12 earlier.
German Chancellor Angela Merkel and French President Nicolas Sarkozy said on Sunday that their goal was to come up with a sustainable answer for Greece’s woes, agree how to recapitalise European banks and present a plan for accelerating economic coordination in the euro zone by a G20 summit in Cannes on 3-4 November. A German government spokesman added on Monday that the talks will be confidential.
“Merkel and Sarkozy met again and could not decide anything apart from trying to reassure us that they will have some proposals out before the G-20 meeting,” Petromatrix’s Olivier Jakob said in a note to clients. “New proposals by the end of the month do not necessarily translate into any action in the short term.”
“At some point, words will need to be replaced by concrete action,” MF Global analysts wrote in their morning note.
The board of Franco-Belgian Dexia bank also accepted on Monday a rescue plan drawn up by the governments of France, Belgium and Luxembourg after it became the first bank to become a casualty of the two-year-old euro zone debt crisis.
SAUDI SUPPLY, US JOBS
Saudi Arabia, the world’s top crude exporter, will supply full contracted volumes of crude oil in November to at least four Asian term buyers, steady with October, industry sources familiar with the matter said on Monday.
Saudi Arabia sees neither a decline in global oil demand nor a reduction in the kingdom’s exports due to increased output from Libya, Oil Minister Ali al-Naimi said on Sunday.
A day before, Naimi said September output fell to 9.39 million barrels per day (bpd) from around 9.8 million bpd in August.
In the United States, more workers were hired in September while job gains for the prior two months were revised higher, data last week showed, easing fears of a double-dip recession at the world’s largest oil consumer.
“The US economic data suggest that we’re not going into recession,” Barratt said.
He added that recent drawdowns in US oil inventories suggested more demand while forecasts of a cold winter could support US oil prices at $85 and $86 a barrel.
In Asia, Shell restarted the largest crude distillation unit at its Singapore refinery less than two weeks after the plant was shut because of a fire.
The drive to partially restart the 210,000-barrels per day (bpd) CDU, one of three at Shell’s largest plant capable of processing 500,000 bpd of crude, is due to strong margins for base oils and lubricants.