Arab Today, arab today brent up above 109 downside risks remain
Last Updated : GMT 08:12:03
Arab Today, arab today
Arab Today, arab today

Brent up above $109, downside risks remain

Arab Today, arab today

Arab Today, arab today Brent up above $109, downside risks remain

London - Arabstoday

Brent crude oil rose a dollar to over $109 (Dh400) a barrel yesterday, helped by a weaker dollar, after posting steep losses in the previous session, but analysts and traders said the risk remained to the downside given the economic weakness in Europe. Brent crude was up $1.207 at $109.44 a barrel by 1015 GMT after closing down $3.66 in the previous session. US crude oil futures were up 72 cents to $99.54. But analysts and traders were sceptical about how long the rally would last. \"This is a reaction to the drop yesterday — I don\'t see anything supportive this morning,\" said Christophe Barret, oil analyst at Credit Agricole CIB. He added that the market seemed to be following movements in the US dollar, which was down 0.52 per cent against a basket of currencies at 0950 GMT. Carsten Fritsch, an analyst at Commerzbank in Frankfurt, said the price rise was also partly related to position squaring ahead of the weekend, and the risk was still to the downside because of the Eurozone debt crisis. \"Bond yields will be the most important factor to watch again today,\" he said. Unsustainable levels Markets are worried about borrowing costs rising to unsustainable levels for nations such as France and Spain, even as Italy pledged to embark on fiscal reforms. Fritsch said the German media was reporting that the European Central Bank buying programme would be limited to €20 billion a week. \"If that is not considered enough to stabilise the bond yields of Spain and Italy, then the yields could spike higher again and increase risk aversion, putting pressure on oil prices as well,\" he said. Spain\'s borrowing costs at a sale of 10-year debt soared to their highest in the euro\'s history on Thursday. Speaking in Frankfurt yesterday, ECB chief Mario Draghi reiterated that downside risks to the Eurozone\'s economic outlook had increased, and expressed his exasperation that the EFSF rescue fund was not yet operational. The uncertainty about how quickly the Eurozone will get to grips with its problems prompted ANZ to join the ranks of banks cutting their forecasts for the spread between European benchmark Brent and US oil to an average of about $5 a barrel over the next 12 months. Prospect The spread has sharply narrowed from $28 in mid-October and was at $9.73 at 1001 GMT yesterday as investors assessed the prospect of the US economy recovering more quickly than Europe\'s. Tony Machacek, a trader at Jefferies Bache, said the bounce in Brent had to be put into context of the week\'s activity. \"We have had a severe sell-off all week and Thursday was probably the biggest move to the downside,\" he said. \"It\'s the usual economic doom and gloom — all eyes seem to be on the Eurozone. Economic slowdown is the main mover of the markets.\" He added that the backwardation in Brent — where prompt prices are higher than those further along the futures curve — was coming in, which suggested demand for Brent had slipped. \"In the nearby spreads the backwardations have nigh on disappeared,\" he said. For January/February it is currently at about 16 cents, but Machacek said it was up at around $1 a few days ago. \"That\'s where the trade players are active — in the calendar spreads. So if backwardation is starting to disappear it suggests a lack of demand for actual crude.\"

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Arab Today, arab today brent up above 109 downside risks remain Arab Today, arab today brent up above 109 downside risks remain

 



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