MW: Oil edges back above $84; euro-zone woes cap rise
By Myra P. Saefong and Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures climbed back above $84 a barrel Tuesday, with traders somewhat hopeful about prospects for progress to address European debt woes, which have weighed on oil demand in the euro zone.
During a conference call Tuesday, Group of Seven finance ministers and central bankers agreed to monitor developments in Europe closely, according to a brief statement issued by the U.S. Treasury. The vow comes ahead of a Group of 20 leaders summit in Mexico later this month.
Japanese Finance Minister Jun Azumi told reporters in Tokyo after the conference call that the G-7 officials agreed to cooperate in order to deal with problems in Spain and Greece, according to news reports.
Against this backdrop, July futures for light, sweet crude CLN2 -0.04% rose 16 cents, or 0.2%, to $84.14 a barrel on the New York Mercantile Exchange. Prices tacked on 75 cents, or 0.9%, on Monday.
The focus in the oil market remains “firmly fixed on Europe’s dilemma, as it should be, with aggregate demand jeopardized,” said Michael Fitzpatrick, editor in chief of the Kilduff Report.
Policy makers have “embarked on a series of rescue packages designed to prop up banks, keep vulnerable peripheral countries inside the euro,and help them begin the long process of paying off their mountainous debts,” he said.
“This is why oil market participants have been correlating their price movements very closely with the single-currency,” he explained. “They have finally realized the dreadful implications for energy demand growth that failure holds.”
In foreign-exchange trading, the dollar gained as the euro EURUSD -0.35% came under modest selling pressure against the U.S. unit. Traders paid attention to remarks by a Spanish official. Read more on currencies.
Treasury Minister Cristobal Montoro told a Spanish radio broadcaster that the high risk premium demanded to hold government debt “says that as a state we have a problem in accessing markets, when we want to refinance our debt,” Reuters reported.
Data watch
The oil market also awaited weekly data on U.S. petroleum supplies.
The American Petroleum Institute is due to release its inventories data later Tuesday, followed by the more closely watched U.S. Energy Information Administration’s report on Wednesday.
Analysts polled by Platts expect that supplies of crude oil fell by 1 million barrels for the week ended June 1. They also forecast increases of 500,000 barrels in inventories of gasoline and 600,000 barrels in distillate stocks.
Product prices were little changed, with July gasoline RBN2 -0.34% nearly flat at $2.67 a gallon and July heating oil HON2 -0.05% tacking on less than 1 penny to stand at $2.63 a gallon.
July natural gas NGN12 +1.45% traded at $2.46 per million British thermal units, up 5 cents, or 2%.
As a result of heightened Environmental Protection Agency regulations, “many coal plants are starting to convert over to natural gas,” said Will McAndrew, chairman and chief executive at Xtreme Oil & Gas Inc. XTOG -20.00% . “To comply with the new clean coal regulations, it would cost many coal producers billions just to burn coal.”
Supply for natural gas will also be steady through the rest of the year, he said. “About 40% of the natural gas rigs are converting to oil. So with less drilling and fewer wells, the market will not be over-flooded with supply like it has been before.”
Myra Saefong is a MarketWatch reporter based in San Francisco.
Virginia Harrison is a MarketWatch reporter based in Sydney. William Watts in Frankfurt contributed to this report.
