FX:Crude oil futures hold above USD108 as sentiment firms up
Forexpros - Crude oil futures eased down for a second day on Tuesday, but remained close to a nine-month high as appetite for riskier assets improved ahead of a liquidity boosting operation by the European Central Bank, while investors continued to monitor tensions between Iran and the West.
On the New York Mercantile Exchange, light sweet crude futures for delivery in April traded at USD108.33 a barrel during European morning trade, easing down 0.22%.
It earlier fell by as much as 0.85% to trade at a session low USD107.68 a barrel. On Friday, prices rose to USD109.92 a barrel, the highest since May 4.
Crude prices came under heavy selling pressure at the start of the Asian trading session, dropping below USD108 a barrel, after ratings agency Standard & Poor's said that it cut Greece’s long term credit rating to 'selective default'.
Warnings from the International Monetary Fund and the Group of 20 nations that higher energy prices were likely to lead to a slowdown in the global economy also weighed.
But prices came off their lows as investors looked ahead to Wednesday's launch of the ECB’s second three-year long-term refinancing operation, after a similar liquidity injection in December eased pressure on peripheral euro zone bond markets.
Also supporting sentiment, Germany’s parliament endorsed a second bailout for Greece by a wide margin.
Meanwhile, oil traders continued to monitor tensions between Iran and the West and a potential disruption to oil supplies from the region.
According to industry sources, Saudi Arabia increased oil output to near 30-year highs in the past week and is offering extra supplies to its biggest customers worldwide in an effort to make up for lost Iranian supplies.
Growing tensions between Iran and Israel also remain in focus. There are fears that an escalation of hostilities between Israel and Iran could set off a conflict across the region and send oil prices skyrocketing.
Israel and the U.S. have previously stated that all options are on the table in ensuring the Islamic Republic does not acquire atomic weapons.
Russian Prime Minister and presidential candidate Vladimir Putin warned Western leaders against a military strike on Iran.
Russia is concerned that there is a “growing threat” of action against Iran that would be “truly catastrophic,” he said in the latest of a series of articles published before Russia’s March 4 elections.
The stand-off between Iran and Western countries has dominated sentiment in the oil market for weeks, raising fears that the escalating row over Tehran's nuclear program could lead to an oil-export halt, a disruption to shipping traffic in the Strait of Hormuz or military conflict.
Iran produces about 3.5 million barrels of oil a day, making it the second largest oil producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia.
Crude oil prices have gained nearly 10% in February.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for April delivery retreated 0.65% to trade at USD123.38 a barrel, with the spread between the Brent and crude contracts standing at USD15.05.
Brent futures have rallied nearly 11% since the beginning of February, as geopolitical and production issues in Iran, the North Sea, South Sudan, Syria and Yemen tightened supplies.
