LONDON (SHARECAST) - Oil staged a significant rally Wednesday as worries over Greek debt subsided while inventories in the US appeared to be placing pressure on the upside.
The decision by Greek politicians to vote through a programme of stringent public spending cuts gave an early boost to the market, although as gains yesterday demonstrated this turn of events had been partially priced in.
The bigger surprise for traders was the announcement that US stocks of crude oil declined by 4.38 million barrels last week. This was significantly more than most analysts had been expecting and so added further impetus to price rises.
The third factor that seemed to be pushing oil upwards was concern over a potential hurricane heading towards Mexico. If it leads to a shutdown of some of Mexico's wells, that would also spell trouble for supplies.
On the London ICE exchange contracts for August delivery of Brent Crude were changing hands at $112.40 per barrel, that's a gain of 3.3%. In New York, the American benchmark West Texas Intermediate was up just over 2% at $94.77 per barrel.
But the bigger picture for oil is complicated by geopolitics. On June 23rd the International Energy Agency coordinated a release of 60 million barrels of “strategic reserve” which had a downward impact on prices. That move came about because the Organisation of Petroleum Exporting Countries failed to agree a production boost after a fractious debate between Saudi Arabia on the one hand and others, including Iran on the other.
Those same tensions are still playing themselves out in market expectations, at the same time as war rages in Libya, instability continues across the Arab world and the fear that Greece may still have to default on its debts refuses to die.
Never a dull day on the oil market...
Meanwhile in afternoon trading in New York, gold was trading up around 0.6% at $1509 per ounce. Silver was up significantly at around $35.8 per ounce – a climb of 3.3%.
