To enjoy the full Mail & Guardian online experience: please upgrade your browser
14 Jul 2008 18:10
Oil prices hovered near $145 a barrel on Monday, swinging between gains and losses as traders weighed global supply concerns and a stronger dollar against worries about the health of the United States economy.
Light, sweet crude for August delivery fell by 52 cents to $144,56 a barrel on the New York Mercantile Exchange. Earlier, the contract dipped as low as $142,49 and rose as high as $146,37.
In London, August Brent crude was down 89 cents to $143,60 a barrel on the ICE Futures exchange.
The declines came as the White House said President George Bush plans to lift an executive ban on offshore oil drilling.
The Federal Reserve said on Sunday it was willing to lend to major US government-backed mortgage giants Freddie Mac and Fannie Mae, which have seen their stock prices plummet amid subprime loan turmoil. The Treasury Department also said it would seek congressional approval to make a possible equity investment in the two companies.
“The Fed action on Fannie and Freddie is a short-term positive because it prevents a credit meltdown,” said Victor Shum, an analyst with energy consulting firm Purvin & Gertz in Singapore. “But longer-term, it shows the extent of the problem facing the US economy.”
The dollar advanced marginally against the euro and yen. Investors have been buying dollar-denominated crude contracts as a hedge against inflation and a weakening dollar, pushing the price of oil to about double in the past year. When the dollar strengthens, such currency-related buying often unwinds.
“We believe that in light of the dollar reversal, energy bulls could find things rather difficult on the upside, at least during the early part of the week,” Edward Meir, an analyst at MF Global, said in a research note.
Markets will be keeping a close eye on this week’s testimony before the US Congress by Federal Reserve chairperson Ben Bernanke, looking for signs, among other things, of which direction interest rates could take in the coming months.
“The stress in financial markets should be a dominant market-making influence this week,” said Olivier Jakob at Petromatrix in Switzerland.
Geopolitical concerns continued to weigh on energy markets.
About 2 500 workers in Brazil’s Campos Basin, which produces more than 80% of Brazil’s oil output, began a strike on Monday to demand that state-run oil company Petrobras give them an extra day off at the end of each two-week shift on the platforms.
“Supply-side concerns in Brazil, Iran and Nigeria are putting a high floor on prices,” Shum said.
Iranian officials vowed on Sunday that the Islamic Republic would fight back against any attacks on it and “cut off the hands” of invaders. The comments came amid heightened speculation that Israel and the US will attack Iranian targets to destroy what they say are Tehran’s suspicious nuclear programmes.
Iran is the Organisation of the Petroleum Exporting Countries’s second-largest oil exporter.
Supply concerns have helped keep energy prices high in recent days, although analysts said specific fears about cutbacks in Brazil and elsewhere were already factored into prices. Oil hit a trading record of $147,27 a barrel on Friday before closing just down from Thursday’s settlement record.
“The [energy] complex will need fresher geopolitical headlines to keep the upside momentum intact,” Meir said.—Sapa-AP
Create Account | Lost Your Password?