BackOil rises to $81 on German data; eyes G20
Oil rises to $81 on German data; eyes G20
PremiumLondon: Oil prices held near $81 a barrel on Friday as positive German data fuelled demand growth expectations as the market awaits a G-20 finance ministers’ decision on currencies.
German business sentiment was the strongest in 3-1/2 years in October, data showed on Friday, suggesting the recovery of Europe’s largest economy may hold up better than expected.
A G-20 finance ministers meeting in South Korea looked unlikely to reach a deal on a US-led initiative aimed at commiting emerging markets to cut current account surpluses and allow their currencies to rise.
US crude rose 48 cents to $81.04 a barrel by 3:33pm, reversing part of Thursday’s drop of more than 2%. ICE Brent rose 73 cents to $82.66 a barrel by the same time.
“Today’s Ifo underlines that the German good-news-show is continuing and is more than just a rebound or a pure statistical effect. The broadening of the recovery will continue," said Carsten Brzeski, ING Financial Markets.
Refinery outages in France are also supported the oil complex on Friday with unions signalling their determination to keep fighting even if President Nicolas Sarkozy’s unpopular pension reform becomes law on Friday.
The move higher came despite a steady dollar, with some analysts suggesting a temporary snap in the strong inverse correlation between oil and the dollar.
Weakness in the dollar this month has stoked buying interest among buyers holding other currencies and investors looking for a hedge against cash.
Edward Meir at MF Global, said: “It seems investors are unsure about how much longer the short-dollar/long commodity trade remains in vogue."
Other analysts thought a failure to reach a deal in South Korea could further weigh on the dollar and reinforce the negative correlation.
A batch of US data on Thursday pointed to slow-growth in the world’s top oil consumer, reinforcing views the Federal Reserve will ease monetary policy further next month in an attempt to jumpstart the economy.
New claims for jobless benefits dropped last week but remained at levels suggesting little improvement in the distressed labour market.
Other reports showed only a modest rise in a gauge of future US economic activity and a small gain in factory activity in the country’s Mid-Atlantic region.
“The general consensus is that more QE (quantitative easing) will be approved, which, in turn, is expected to reduce unemployment and boost demand," said Tamas Varga at oil broker PVM.
Traders are expected to watch closely the result of the weekly US ECRI - a leading economic index at 8:00pm, for further clues about the pace of economic growth in the world’s largest oil consumer.
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