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  • March 9th, 2012

Brent holds above $125 on Greek deal

Brent crude held above $125 on Friday, heading for its sixth weekly gain in seven, following news of a successful Greek debt swap deal that brings the country a step closer to securing a bailout needed to avoid a messy default.

Greece said 85.8% of private creditors had accepted its bond swap offer, averting the immediate risk of an uncontrolled default while also allaying concerns about oil demand.

Brent crude, which is set to rise more than 1% this week, fell 35 cents to $125.09 a barrel early on Friday. US crude was up 33 cents at $106.91.

“Europe has a big impact on Brent prices and the market has been pricing in a more positive outcome and is also closely watching sentiment data out of the United States,” said Natalie Robertson, an analyst at ANZ Bank.

US data showed unemployment benefit claims in the top oil consumer rose last week but not enough to change the outlook that the labor market was growing stronger, helping to hold gains in crude prices.

The jobless claims data bolstered expectations for a solid rise in payrolls in a US government report due later on Friday on how the jobs market fared in February.

Oil prices also found support from data out of top energy consumer, China, showing annual inflation cooled to a 20-month low of 3.2% in February, below its 2012 target of 4%, giving policymakers room to ease monetary policy to support slowing growth.

But a lower-than-expected growth in factory output in China underscored the downside risks to the world’s second largest economy, keeping a lid on oil price gains.

Investors kept close watch on the tension between Iran and the West over Tehran’s nuclear program, which has driven up oil prices recently.

Led by the US, six world powers demanded on Thursday that Iran fulfill a promise to let international inspectors visit a military installation where the UN nuclear watchdog believes explosives tests geared to developing atomic bombs may have taken place.

Iranian Supreme Leader Ayatollah Ali Khamenei welcomed comments by US President Barack Obama about a diplomatic “window of opportunity” offered by renewed talks, but said Washington’s simultaneous moves to “bring the Iranian people to their knees” with harsh sanctions were driven by delusion.

“As crude flows tighten from Iran and Iraq said it has increased production, there could be a gap period in between where the supply and demand don’t match,” said Roberston.

“What could cap oil prices is the potential for the release of emergency stockpiles and if we see oil prices start to erode demand and impact global growth,” Robertson said.

“If that happens, there could be a pullback in oil and commodity prices, and the market will move towards more safe-haven assets instead of riskier assets.”

US Energy Secretary Steven Chu repeated the Obama administration’s position that releasing crude oil from US reserves in an effort to bring down rising gas prices was still an “option on the table”.


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