WSJ:OIL FUTURES: Oil Flat As US Debt, Europe Bank Worries Prevail
--Oil market unchanged to lower as U.S. debt, European bank worries prevail
--Oil jittery over U.S. debt ceiling, potential credit rating downgrade
--Brent September crude moves into slight contango structure
By Selina Williams
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Crude oil futures are mostly unchanged to weaker Friday as worries over U.S. debt, European bank stress test results and Greek debt contagion dampened sentiment.
"All the key drivers for long-term buying are exhausted now and as much as the market remains bullish in the long-run amid tightening global spare capacity, at the moment you'll be in macro trading mode because people are concerned about the euro zone, the bank stress tests and Italy," says Andrey Kryuchenkov, vice president of commodities research at VTB Capital.
At 1023 GMT, the front-month September Brent contract on London's ICE futures exchange was down 22 cents, or 0.2%, at $116.04 a barrel. The front-month August contract on the New York Mercantile Exchange was trading up 5 cents, or 0.06%, at $95.74 a barrel.
The stronger dollar and weak equities markets earlier in the morning added to the pressure on oil prices, already jittery over the U.S. debt ceiling standoff and the potential impact on the country's credit ratings.
Standard & Poor's Thursday became the second ratings agency after Moody's to warn it could downgrade the U.S. amid a lack of resolution over its debt ceiling.
The warning came on top of Federal Reserve Chairman Ben Bernanke's comments Thursday dousing expectations of a third round of quantitative easing and sent Nymex crude down $4 a barrel from its intraday high.
Nymex crude's move lower took the contract well away from the key $100 a barrel level that it has been trying to break through in the past 10 days. This has put first support at $95 a barrel and then the 200-day moving average of $94.10 a barrel. However, once through $94.10, there is no more strong support until $90 a barrel, Olivier Jakob, managing director of Swiss consultancy Petromatrix said in a note.
Meanwhile, the Brent August contract expired Thursday in wide backwardation, a structure where near-term prices are higher than those further out. The September contract is now trading in a small contango, where near-term prices are cheaper than those further out, versus the October contract and down the curve for several months.
The contango structure shows the current pressure on global crude markets and could potentially encourage the storage of crude in Europe should the contango strengthen and remain, analysts said.
The ICE's gasoil contract for August delivery was down $6, or 0.6%, at $966.50 a metric ton, while Nymex gasoline for August delivery was down 80 points, or 0.3%, at $3.1168 a gallon.
