Oil rebounds to $81 as European debt woes ease

Oil rebounds to $81 as European debt woes ease

Singapore: Oil rebounded from four-week lows on Thursday as a weaker dollar and cautious optimism about Ireland’s debt crisis rekindled interest for commodities, while a sharp crude inventory decline in the United States supported prices.

Front month US crude on Wednesday touched $80.06 a barrel, the lowest intra-day price since 20 October, capping a four-session drop that knocked off about 8% from a 25-month high of $88.63 a week ago amid concerns about European sovereign debt and a potential increase in Chinese interest rates.

The December contract on Thursday rose 57 cents to $81.01 at 8:49am, ICE Brent gained 72 cents to $84.

Ireland agreed on Wednesday to work with a European Union-IMF mission on urgent steps to shore up its shattered banking sector, a process that could lead to a bailout despite Dublin’s deep reluctance.

“There is concern about Europe, but markets have already priced that in quite aggressively in the past few days," said Mark Pervan, a senior commodities analyst at ANZ in Melbourne.

“This is a bit of a buy-on-the-dip story, with equity markets giving a reasonable guide in Asia. Inventory data was put to the side yesterday, but the crude numbers look pretty good and today’s move could be a late response."

US crude stocks plunged the most in more than 14 months last week as fewer imports and higher refining rates slashed inventories, according to a weekly government report from the Energy Information Administration on Wednesday.

Inventories fell unexpectedly by a sharp 7.29 million barrels to 357.6 million barrels in the week to 12 November, while crude imports fell 226,000 barrels per day (bpd) to 7.83 million bpd.

Stocks of oil products also fell, although more closely in line with analyst expectations. Gasoline fell by 2.66 million barrels, versus forecasts for an 800,000-barrel draw, while distillate stocks declined 1.11 million barrels compared with a projected 2.2 million barrel drop.

The dollar dipped against the euro on Thursday after subdued US inflation supported the Federal Reserve’s case for quantitative easing, while Asian equities stabilised after an eight-day sell-off. The greenback slid almost 0.3% against a basket of currencies.

US government figures showed the lowest core annual inflation rate on record and a steep drop in housing starts from already depressed levels. The data implied the Fed will carry on with quantitative easing.