Oil retreats, focus on grim economy

Crude oil prices fell yesterday, after a sharp gain the previous day, as investors returned their focus to the grim global economic backdrop, though expectations of fresh stimulus measures limited losses. Trading was thin, with US markets closed for the Independence Day holiday and ahead of meetings of policymakers at the European Central Bank and the Bank of England scheduled today. Brent crude oil was $1.08 lower at $99.60 per barrel by 1539 GMT, after jumping more than 3% in the previous session on short-covering before the US holiday. Brent crude had reached as low as $88.49 on June 22. US crude fell 68¢ to $86.98 after settling on Tuesday at its highest close since May 30. “After a strong rally yesterday, with the US liquidity out of the market, the market is moving to a level that is easier to defend,” Filip Petersson, an analyst at SEB in Stockholm, said. “I expect it to be a bit bearish, but a 1% fall after several days with several percent rises is not a big move.” Oil prices were supported by expectations for more monetary stimulus and by rising tension over Iran’s nuclear programme, which fed worries about disruptions to supply. The European Central Bank is expected to cut its main refinancing rate to a record low below 1% at its policy meeting today. Investors are also hoping for quantitative easing (QE) from the US Federal Reserve, which could become more likely if there is weak non-farm payrolls data on Friday. “If the data at the end of the week disappoint, it could increase the likelihood of QE, which would weaken the dollar and support growth,” said Gareth Lewis-Davies at BNP Paribas.