Oil gains ground on hopes for Greece resolution

Oil gains ground on hopes for Greece resolution

London: Oil rose on Tuesday as an agreement by France to roll over holdings of mature Greek debt boosted appetite for riskier assets like commodities and helped lift the euro against the dollar.

President Nicolas Sarkozy said French banks had reached a draft agreement with the authorities on a voluntary rollover of maturing bonds.

This settled investor nerves as markets anxiously awaited the outcome of a vote in Greece to approve unpopular fiscal austerity measures.

ICE Brent crude for August was up 68 cents to $106.67 a barrel by 3:12pm, after hitting an intraday high of $107.50. US crude added 35 cents to trader at $90.96.

Oil was also supported as the euro gained and the dollar index fell as a weaker US currency makes it more attractive to holders of other currencies.

“If there’s a resolution to the situation in Greece, it will boost the euro and that will support oil as there’s such a strong FX component," Harry Tchilingurian, oil analyst at BNP Paribas said.

Investors were still watching to see if Greece’s parliament will approve austerity steps that are a precondition for international aid that the country needs to avoid a default.

Prices were expected to remain volatile as some investors were still worried about the result of the Greek vote, said Ken Hasegawa, a commodity sales manager at Newedge Japan.

“WTI (West Texas Intermediate, or US crude futures) may be supported around $90, but any upside will be limited because of concerns about the economy in the euro zone," he said.


Without approval, the European Union and the International Monetary Fund say they will not disburse the fifth trance of Greece’s 110 billion-euro bailout programme. Athens needs the aid to pay its bills next month and avert the euro zone’s first sovereign default.

Investors are closely watching the impact of the release of 60 million barrels of oil from International Energy Agency reserves.

South Korea will start to release 3.46 million barrels of oil, including 2 million barrels of crude and 1.46 million barrels of products by “today at the earliest," a source at the economy ministry said.

Reactions from members of the Organization of the Petroleum Exporting Countries, many of whom oppose the release, are also under scrutiny, analysts said.

BP’s chief economist told Reuters Insider TV on Monday oil consuming nations risk a long conflict with a trenchant OPEC by challenging the producers’ club on its own turf with a supply response to high prices, and the strategy could backfire.

Iran said on Tuesday there was no need for an OPEC emergency meeting as the oil market is balanced, the Oil Ministry website quoted Iran’s OPEC governor Mohammad Ali Khatibi as saying.

The market is also gearing up for crude inventories data in the United States in industry data due late Tuesday. Analysts are expecting stocks to shrink for the fourth week in a row.

Investors were also watching events in Libya, after the International Criminal Court issued an arrest warrant on Monday for leader Muammar Gaddafi, and rebels trying to oust him said their forces had advanced to within 80 km (50 miles) of the capital.