Oil above $91 as traders mull IEA reserves release
Originally published June 24, 2011 at 12:49 a.m., updated June 24, 2011 at 5:07 a.m.
SINGAPORE (AP) — Oil prices hovered above $91 a barrel Friday in Asia after a big drop the day before when the IEA announced the release of emergency crude supplies.
Benchmark oil for August delivery was up 20 cents to $91.22 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. In London, Brent crude for August delivery was down 53 cents to $106.73 a barrel on the ICE Futures exchange.
Crude fell $4.39 to settle at $91.02 on Thursday after the International Energy Agency said it will make 60 million barrels available over a 30-day period, half of which will come from the U.S. Strategic Petroleum Reserve.
Analysts said the move likely reflected increasing concern that the global economy is slowing, and that high oil prices exacerbate quickening inflation and tepid consumer demand.
Earlier this week, Federal Reserve Chairman Ben Bernanke warned that the U.S. economy is weaker than previously forecast, and lowered this year’s gross domestic product growth estimate to 2.9 percent from 3.3 percent.
The IEA move “may ease tightening demand-supply concerns and result in further downside pressure in oil prices in the near-term,” ANZ bank said in a report. “The softening of oil prices may be a significant plus to boost global economic growth through the second half of the year.”
The release of reserves also comes after OPEC decided against boosting its production quotas at a meeting earlier this month.
Some observers were puzzled by the timing of the IEA move since crude had already fallen from near $115 on May 2 and Libya’s 1.6 million barrels a day of oil output have been shut down since February.
“The IEA’s announcement appears to be nothing more than a well-timed public relations stunt designed to punish speculators,” said Richard Soultanian of NUS Consulting. “The impact will be short-lived and the markets will quickly revert back to the pattern they have been following for the past months, which is closely following movements in the U.S. dollar.”
When the dollar gains, crude tends to fall because a stronger U.S. currency makes commodities such as oil more expensive for investors with other currencies. When the dollar weakens, crude prices usually go up.
The euro was steady at $1.4269 on Friday after dropping Thursday.
In other Nymex trading in July contracts, heating oil rose 1.3 cents to $2.79 a gallon while gasoline dropped 0.5 cent at $2.83 a gallon. Natural gas futures fell 0.2 cent at $4.19 per 1,000 cubic feet.