Oil prices were on the rise today as traders welcomed the positive resolution of the political crisis in Greece, where Prime Minister George Papandreou survived a confidence vote on Friday and later agreed to form a coalition government and resign once the new government is in place. Encouraged by the progress made by Greek politicians, commodity markets shrugged off today’s surge in Italian bond yields, which nearly reached 6.7 percent. This is dangerously close to the psychologically significant level of seven percent, which was reached by Greece, Ireland and Portugal before they were bailed out. The increase in yield came ahead of tomorrow’s confidence vote that could topple the current government led by Silvio Berlusconi, delivering a setback to the country’s effort to curb spending and balance its budget. The soaring yields may make it hard for Italy to borrow money to service its debts. As Italy is the third largest economy in the euro zone, its default would have more significant repercussions for Europe than the collapse of the Greek economy. Demand for oil futures is also supported by a decline in crude oil stockpiles in the US. Last week, Goldman Sachs advised to buy NYMEX oil contracts for December 2012, noting that inventories at Cushing, Oklahoma, the main delivery point for NYMEX crude, are in decline. Since the beginning of the year, stockpiles at Cushing have shed 14 percent. US light, sweet crude for December delivery, currently the most actively trade contract on the New York Mercantile Exchange (NYMEX), climbed US$1.09 to US$95.35/barrel in morning trade in New York. December Brent crude rallied US$1.91 to US$114.16/barrel on the ICE Exchange this afternoon.

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