Brent crude fell, staying below $111 a barrel on Thursday as ongoing concerns over Europe's debt crisis and a firmer dollar drew investors away from riskier assets like oil and into the safe havens of gold and the Swiss franc.Brent crude for October fell 10 cents to $110.50 by 0331 GMT, after settling $1.47 higher at $110.60 a barrel on Tuesday. US crude was down 20 cents at $87.38 a barrel, after closing up nearly a dollar in the previous session.
Oil has been under pressure this week after plans from France and Germany to move toward fiscal union in 2012 failed to reassure investors worried the region's debt crisis is spiralling out of control, hitting growth and demand for oil. Adding to the woes, the Swiss National Bank refrained from introducing an exchange rate for the franc to cool the currency.
"The market was disappointed when Swiss central bankers didn't propose a euro peg, it sent a signal that they are contented to let the franc appreciate and that led to a flight to safety, away from assets like oil," said Gordon Kwan, head of energy research at Mirae Asset Securities in Hong Kong.
The plight of the franc was part of a larger battle over Europe's fiscal crisis, with the Swiss currency a beneficiary of investors seeking safety in a currency other than the euro.
Prices were also depressed by a stronger dollar, which rose as high as 0.35 percent against a basket of currencies on Thursday, making dollar-denominated assets more expensive when purchased in other currencies.However, the dollar, which could hit record lows against the Swiss franc in days ahead, will likely remain under pressure as long as the US economic recovery stays tenuous, analysts said.Brent crude may hover in a range of $109.57-$112.13 per barrel for one trading session, while US oil is due for a correction as it failed a strong resistance at $88.17, Reuters technical analyst Wang Tao said.
Further weighing on sentiment was government data showing an unexpected jump in US crude stockpiles, overshadowing a sharp decline in gasoline inventories.
US gasoline stocks fell 3.51 million barrels last week, the Energy Information Administration said on Wednesday, surpassing analysts expectations for a 1.3 million barrel drawdown. However, domestic crude inventories unexpectedly rose 4.23 million barrels last week.
Saudi Arabia, the world's top oil exporter, contributed to rising global supply after it pumped 9.813 million barrels a day (bpd) of crude in June, up about 918,000 bpd from May, while exports rose to their highest since 2008, official Joint Data Initiative figures show.
"With Brent trading above $110 barrel, we do not expect any OPEC members to move to reduce production, given healthy refiner demand for OPEC crude," said analysts at J.P. Morgan in a research note on Wednesday.While debt concerns in Europe and the US hog the headlines, a hard landing in China remains a key risk for oil demand, analysts said."China demand has been driving the markets since 2008 and that could be derailed if there is over tightening, although a hard landing for the economy doesn't look likely," said Kwan.
From / Arabian Business News