WSJ:OIL FUTURES: Crude Up As Greek Government Seen Surviving Vote
LONDON (Dow Jones)--Crude oil futures were higher Tuesday as European stocks rose and the dollar weakened against the euro on expectations that the Greek government will survive a vote of confidence later in the day.
However, oil prices are likely to remain jittery and there could be bursts of volatility in the market until the outcome of the vote is clear, oil analysts said.
At 1159 GMT, the August Brent contract on London's ICE futures exchange was up 84 cents, or 0.8%, at $112.53 a barrel. The July contract on the New York Mercantile Exchange was trading up $1.13, or 1.2%, at $94.39 a barrel.
A pledge by European leaders Monday to head off a Greek debt default eased sovereign debt concerns and helped oil prices rebound from earlier four-month lows.
But the recently reshuffled Greek cabinet must win a vote of confidence for the nation's austerity reforms to be considered and discussions with the European Union and the International Monetary Fund for a new bailout package to proceed.
"The more expected positive outcome would boost sentiment. However, this would by no means be the end of the Greek crisis but would rather be another obstacle cleared on a very long way back to sound public finances," said Filip Petersson, commodity strategist at SEB Commodity Research.
European Finance Ministers are to gather in early July to formally approve a EUR12 billion tranche to Greece to be paid out mid-July. But this is unlikely to be the end of the story as Greece will most likely need another bailout. Talks on a second installment could drag on over the summer, weighing on markets and prices, MF Global said in a research note.
Once the vote is out of the way, focus on commodity markets is likely to revert back to more pressing macro concerns as visible signs of slowdown in global economic growth are likely to exert downward pressure on prices, the note said.
"We think such growth concerns will remain in place until such time that we get a meaningful decline in energy prices," MF Global said.
This weakness in the oil futures market comes at the same time as demand in the physical crude market ramps up in the summer driving season and ahead of the winter, said Torbjorn Kjus, oil market analyst at DnB NOR.
"It [the oil market] has had a split personality and has been a bit schizophrenic lately," Kjus said referring to what he expects will be weaker demand in the financial side of the market despite the stronger physical demand.
Aside from Greece woes, market participants will also be looking ahead to weekly data on U.S. oil inventories due Wednesday from the department of Energy.
Analysts expect U.S. oil stocks to show a modest decline. Crude stockpiles are forecast to fall by 100,000 barrels, according to an analyst survey by Dow Jones Newswires.
Gasoline stocks are expected to rise by 800,000 barrels, while stocks of distillate, which include heating oil and diesel, are expected to rise by 700,000 barrels.
The ICE's gasoil contract for July delivery was down $3.25, or 0.4%, at $929.25 a metric ton, while Nymex gasoline for July delivery was up 198 points, or 0.7%, at $2.9313 a gallon.
