Brent remains above $ 120 on Iran worries, Greece optimism
SINGAPORE (Reuters): Brent crude remained above $ 120 on Friday on persistent supply worries with major European buyers cutting purchases of Iranian crude and hopes of an increase in demand as Greece edged closer to a bailout deal.
Top European buyers of Iranian oil are making substantial cuts in supply well ahead of European Union sanctions as financing their purchases gets harder, reducing flows to the continent in March by more than a third, or over 300,000 barrels daily. Growing optimism that Greece has finally done enough to secure a second bailout after it set out extra budget savings also boosted sentiment on crude.
Front-month April Brent crude futures were up 21 cents to $120.32 at 0506 GMT, after trading as high as $120.63.
US crude climbed 15 cents to $102.46, with the premium of Brent over US crude widening to above $17. “Brent is reacting to a combination of things, including continued optimism over Greece, a weaker dollar and the market focusing on reduced exports from Iran to Europe,” said Jonathan Barratt, Chief Executive of Barratt’s Bulletin.
The euro rose against the US dollar as hopes a Greek bond swap could be within reach lifted investor sentiment and risk tolerance.
Expectations that euro zone finance ministers will sign off a bailout deal for Greece on Monday increased after a proposal to withhold part of the bailout until after Greek elections expected in April was dropped.
In a further sign of an emerging agreement, national central banks in the currency bloc would exchange holdings of Greek bonds this weekend in the run-up to the private sector debt deal to avoid taking forced losses, euro zone sources said.
“The Europe financial meeting on Monday is going to be the key driver in oil prices,” said Ken Hasegawa, a commodity derivatives manager with Newedge Brokerage in Tokyo.
“I’m technically expecting a healthy correction in Brent, with some profit-taking selling after the meeting.”
Upbeat data out of the United States showing a reduction in jobless claims which suggested a possible recovery in the labour market also helped boost crude prices.
Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 348,000 last week, the lowest level since March 2008 and below economists’ prediction of claims rising to 365,000.
Uncertainties on Iran and troubles faced by other countries in the Middle East and Africa, however, will continue to overshadow positive US news, analysts said.
“The situation in Libya, Nigeria, Syria, Sudan and Iran are all more related to Brent rather than WTI,” said Hasegawa.
He added that the Iran issue will also dominate oil prices until it is resolved, keeping Brent prices above $ 110.
