Oil edges lower as European debt concerns linger

Reuters, Wednesday 24 Nov 2010

Oil prices remain on edge amidst continued worry over European debt crisis


Oil edged lower on Thursday as concerns about European debt lingered. The drop follows a rise of more than 3 percent a day earlier on strong U.S. macro-economic data. 

A surprise crude inventory gain in top consumer the United States last week also pressured prices, with U.S. crude for January down 16 cents at $83.70 a barrel by 0732 GMT (2:32 a.m. ET), after rising $2.61 or 3.2 percent on Wednesday, the biggest percentage gain in four months.

ICE Brent declined 22 cents to $85.62.

"At the moment, the tempo is more upbeat than when we started the week, but nothing has gone away," said Geoff Howie, sales and markets strategist at MF Global in Singapore.

"The biggest fear is that if there is volatility in European markets, that will derail the inroads that the U.S. has made this year, like it did in May."

Ireland unveiled an ambitious austerity plan to tackle its debt crisis and secure an international bailout, but officials gave mixed messages on whether its debt crisis could spread to other euro zone members or even endanger the common currency.

Oil tumbled to 2010 lows under $65 in May as the Greek debt crisis dampened confidence about the global economic recovery. They rebounded to a two-year high of $88.63 on November 11.

Earlier this week, prices dropped to near $80 after North Korea's deadly artillery barrage targeting a disputed South Korean island that boosted the value of the dollar and reduced the appetite for riskier commodity assets.

"We still have to see the full response through to the Korean incident," Howie said.

South Korea ordered extra troops deployed on islands near North Korea on Thursday with Pyongyang warning it would follow its latest bombardment with more attacks if its wealthy neighbor tried any "provocations".

Initial jobless benefits claims in the U.S. fell to their lowest level in more than two years last week while consumer spending rose for a fourth straight month in October, reports showed on Wednesday, fueling hopes the economic recovery is strengthening

The New York Mercantile Exchange (NYMEX) is combining trades for November 25 and November 26 into one single trading session because of Thursday's Thanksgiving holiday in the U.S.

U.S. crude oil stockpiles rose 1.03 million barrels in the week to November 19 as crude imports jumped by more than a million barrels per day, the U.S. Energy Information Administration said on Wednesday.

Analysts polled by Reuters had expected crude stocks to fall 2.1 million barrels, but the jump reported by the EIA was much less than the American Petroleum Institute's report showing stockpiles increased 5.2 million barrels.

Gasoline stocks rose 1.91 million barrels, the EIA said, against expectations for a 600,000-barrel draw, and distillate stocks fell 541,000 barrels, much less than analysts' expectations for a larger 1.2 million-barrel draw.

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