Oil prices fell back yesterday in volatile trade, having rebounded earlier on the back of the Spanish banking bailout deal and easing Chinese inflation, traders said.
Oil producing countries are concerned over the drop in oil prices and the ‘strange’ behaviour of the oil market
In late afternoon London deals, Brent North Sea crude for July dropped 30 cents to$99.17 per barrel. In earlier Asian trade, the contract had spiked to $102.21 in the wake of the eurozone agreement.
New York’s main contract, West Texas Intermediate crude for delivery in July fell 39 cents to $83.71 a barrel.
The oil market hit reverse gear after as Wall Street opened flat, with the pending Greek elections keeping worries over the eurozone debt crisis alive.
“Positive sentiment evaporated as the US markets opened. The terms of the bailout remain unclear, and there are concerns that Spain is set to get a better deal than Greece, Ireland and Portugal,” said GFT analyst David Morrison.
“This may lead to more votes for the ‘anti-bailout’ Syriza party at Sunday’s Greek general election, further destabilising the eurozone.
“Oil came under further selling pressure after Saudi Arabia’s oil minister, (Ali) al-Naimi, was reported as saying that the Kingdom may have to adopt a higher oil output target at Opec’s meeting on Thursday.
“With oil demand softening due to slowing global growth, and WTI down over 22 per cent since February, any increase in supply will keep speculative buyers on the sideline.”
Crude futures had initially rallied after the Spanish news, but sank on doubts over whether the rescue deal would help resolve the eurozone’s long-running sovereign debt drama.
“High volatility and nervous trading conditions are likely to continue as investors might remain cautious ahead of the Greek elections this upcoming weekend,” noted Sucden analyst Myrto Sokou.
Eurozone finance ministers on Saturday threw Spain a lifeline to save its stricken banks amid efforts to avert a broader financial catastrophe.
The 17-nation eurozone agreed to lend Spain up to €100 billion to rescue its battered banks.
The Spanish bailout package marked a dramatic climbdown for Madrid, which had denied any need for outside aid to prop up its troubled lenders.
Traders remain on tenterhooks before Opec’s regular output meeting in Vienna on Thursday.
Kuwait’s Oil Minister Hani Hussein said yesterday that oil producing countries are concerned over the drop in oil prices and the “strange” behaviour of the oil market.
“Some of the (OPEC)members are concerned about the prices and what’s happening,” in the oil market after crude prices dropped more than 20 percent during the past two months, Mr Hussein told reporters.
“There are some concerns about what direction prices are taking and production,” Mr Hussein said.