Oil falls from 11-week high ahead of bank test results
Crude prices slid from an 11-week high to stay near $79 today, as uncertainty about European bank stress tests and US oil demand tempered a boost from positive corporate results and storm threats.business Updated: Jul 23, 2010 14:03 IST
Crude prices slid from an 11-week high to stay near $79 on Friday, as uncertainty about European bank stress tests and US oil demand tempered a boost from positive corporate results and storm threats.
Prices have still climbed about four per cent this week, with US crude for September down 35 cents at $78.95 a barrel on Friday by 0658 GMT.
They jumped more than 3 per cent on Thursday as Tropical Storm Bonnie over the Bahamas was forecast to move towards energy infrastructure in the Gulf of Mexico.
Asian stocks rose on Friday as strong earnings from US economic companies such as Caterpillar eased concerns about a global slowdown, while the euro steadied ahead of European bank stress test results later in the day.
But sales of previously owned US homes hit a three-month low in June while new claims for jobless benefits surged last week, Thursday data showed, the latest indications the economic recovery of the world's top oil-consuming nation remains tentative.
"There are still a lot of macroeconomic concerns around, and the stress tests from Europe are also spurring some uncertainty," said Stefan Graber, a commodities analyst with Credit Suisse in Singapore.
"We still have some weak spots in the oil market, and on a global scale, it is fairly balanced at the moment," Graber said, adding that "the fundamentals warrant this range between $70 and $80," within which oil has continuously traded for almost seven weeks.
September ICE Brent crude fell 32 cents to $77.50.
BANKS IN QUESTION
Results of the tests on 91 European lenders are eagerly awaited by markets whose scepticism about the sector has driven up funding costs and hurt appetite for risk since Greece's debt crisis triggered fears the euro zone could unravel.
Several of Spain's 18 savings banks, including some of those which have been involved in recent mergers, have failed to pass tests to see how they would cope with worsened economic conditions, newspaper El Pais reported on Friday citing financial sources.
"Sentiment could show some decisive improvement if markets think that the results of the tests are credible, that it's a fair assessment of the situation in the banking system and that only moderate recapitalisation is necessary," Graber said.
Major companies including UPS and 3M reported strong revenues on Thursday, easing investor concerns about future growth and boosting Wall Street and commodities.
Forecasts call for Bonnie to pass over key oil and natural gas production areas to the south of Louisiana before making landfall in four days.
All the weather models show the storm will skirt Florida and move northwest across the oil-producing central Gulf of Mexico before hitting the coast.
The storm threatened efforts to plug BP Plc's Gulf of Mexico oil leak on Friday and officials said many of the vessels and rigs involved in the operation would prepare to move out of the system's path.