MW: Oil toes the line between small gains and losses
By Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures seesawed between gains and losses Friday, finding some strength in early floor trading after the prior session’s rout on a surprising supply increase.
The market struggled to recover from a Thursday plunge of 4.6% after the U.S. and other members of the International Energy Agency announced they will release 60 million barrels of oil into markets over the next 30 days to counter the loss of oil exports from Libya.
Benchmark crude for August delivery CL1Q -0.04% added 13 cents, or 0.3%, to $91.31 a barrel. It earlier traded as high as $92.34 a barrel and as low as $90.24 a barrel.
The release of strategic reserves weighed on the market Friday, although reports late Thursday that Greece has gained European Union and International Monetary Fund approval of its latest five-year austerity plan offered some encouragement about the global growth outlook.
The dollar stayed higher against the euro, drawing buyers as currency traders remain nervous about the precariousness of Greece’s debt situation.
That puts pressure on commodities priced in dollars. Read more about the dollar and Greece.
“The immediate market reaction has taken the form of a drift lower in crude prices, with the potential acute tightness in the third quarter being alleviated to some degree,” analysts at Barclays Capital said. “Market participants see this as bearish for prices in the short term.”
On Thursday, oil closed at its lowest level since February. Read about falling oil prices.
It marked the third time in the IEA’s history that its members have decided to release stocks. The United States will release half of the fresh reserves, in a move designed to ease shortages and help counter the global economic slowdown. Read more on the IEA’s move.
Earlier this month, members of the Organization of Petroleum Exporting Countries failed to reach consensus about a production increase and left official target levels the same.
“Since the shortfall from Libya is less than 1.5 million barrels per day, [the IEA’s decision] has helped to offset the disappointment in the market at OPEC’s failure to lift production quotas earlier this month,” analysts at Capital Economics said.
“Our view has always been that oil prices would fall anyway, given the deteriorating prospects for demand and the likelihood that some OPEC members, led by [Saudi Arabia], would raise output regardless of the formal ceilings,” the analysts said.
