Oil erases gains as Asian stocks pull back

Oil erases gains as Asian stocks pull back

Tokyo: Oil erased early gains to below $82 a barrel on Friday, as Asian stocks pared gains and technicals indicated weakness ahead of the weekend, after sharp rises on an improved outlook for Ireland’s debt crisis.

US crude for December delivery, which expires after Friday’s settlement, was trading down 41 cents at $81.44 a barrel by 10:39am, after rising as high as $82.50 earlier.

Oil, which settled up $1.75 on Thursday, still remains well below a 25-month high of $88.63 hit on 11 November, but recovered after hitting a four-week low of $80.06 on Wednesday amid concerns about the euro zone’s fiscal health.

Oil could drop back to $80.06 per barrel as its rebound could have fizzled, Wang Tao, Reuters technical analyst, said on Friday.

London Brent crude was trading 44 cents lower at $84.61 a barrel.

“Precious metals such as silver and palladium are climbing and so are stocks, boosting market sentiment," said Shuji Sugata, a manager at Mitsubishi Corp Futures. “There are slight signs of risk-taking, but new position taking is difficult because volatility is high at the end of the week."

Prices received support earlier from a 7.3 million-barrel drawdown in crude stocks in government data reported on Wednesday, the biggest weekly fall in 14 months.

The euro held on to its recent gains on Friday on budding hopes that Ireland is near a deal to shore up its banks and budget deficit, although the currency stopped short of breaking above major resistance.

Ireland’s central bank chief said he expected the country to receive tens of billions of euros in loans from European partners and the IMF to help shore up its troubled banks and stabilise the economy.

Federal Reserve chairman Ben Bernanke defended the US central bank’s controversial bond-buying programme on Thursday against criticism that it is debasing the dollar, saying a vigorous US recovery is central to global economic health.

No major economic indicators are due on Friday.

BNP Paribas raised its 2011 forecast for the average U.S. crude oil price to $88 a barrel on Thursday, up $2 from its previous view, it said in a research note.

Japan’s Nikkei average pared gains after climbing to a fresh five-month high above 10,000, which was propelled by hedge fund inflows from overseas and additional support from a fall in the yen.