BLBG:Oil Trades Near Six-Week Low as Hopes for Europe Solution Fade
Oil rebounded from near its lowest in more than six weeks in New York as advancing equity markets eased concern that European government measures will be unable to stem the debt crisis.
Oil erased earlier losses of as much as 1.1 percent to trade up 0.5 percent near $94 a barrel as the Stoxx Europe 600 Index reversed opening losses. European Union finance ministers will hold a conference call today addressing a self-imposed deadline for drawing additional aid and creating new budget rules. Bank of America Corp. said an Iranian production halt could boost prices as much as $40 barrel.
“There are enough contradictory pressures on the oil market to go into the holidays with a neutral position,” said Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, who correctly predicted earlier this month that prices would slide. “On the bearish side there is the risk of European downgrades, but there’s also the risk of tougher rhetoric against Iran.”
Crude for January delivery on the New York Mercantile Exchange was up 46 cents at $93.99 a barrel at 9:31 a.m. London time. The contract, which expires tomorrow, fell as low as $92.52 on Dec. 16, the lowest price since Nov. 3. The more actively traded February futures were at $94.19, up 43 cents. Prices are 2.9 percent higher this year after rising 15 percent in 2010.
Brent oil for February settlement on the London-based ICE Futures Europe exchange was at $104.09 a barrel, up 74 cents, after declining as much as 98 cents, or 1 percent, to $102.37 a barrel. The European benchmark contract was at a premium of $9.90 to New York-traded West Texas Intermediate for the same month. The front-month spread was a record $27.88 on Oct. 14.
Oil prices could increase by $40 a barrel if Iranian output is completely halted, Bank of America Corp. said. Crude prices could fall to an average $100 a barrel in the first quarter and U.S. West Texas Intermediate to $92 after OPEC agreed to a 30 million barrel a day production limit, the bank said in a note.
“A potential closure of the Strait of Hormuz could result in a much faster oil price escalation,” it said.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
