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Brent price swings with eurozone crisis

Benchmark’s prices bounced between $112/b and $106/b over five trading sessions

Brent crude yo-yoed across a $6/b range over the past week on continuing concerns over the impact Greece’s debt crisis will have on the eurozone. The North Sea benchmark’s prices bounced between $112/b and $106/b over five trading sessions, settling slightly higher at around $109/b on 2 November.

“Global oil markets are range-bound, whipsawed by eurozone sentiment and caught between bearish fears about economic oil-demand growth, and bullish physical tightness in the market,” said Société Générale oil analyst Michael Wittner.

Oil prices rose after an EU rescue package for Greece was agreed. The deal included writing off 50% of the debt Greece owes to banks and increasing the European Financial Stability Facility to €1 trillion ($1.37 trillion) from €440 billion, in exchange for strict austerity measures.

But Greece’s socialist prime minister George Papandreou torpedoed this by announcing a national vote on the package – this may not happen until the beginning of December – resulting in the EU and IMF withholding November’s tranche of the €110 billion bailout, agreed last year, until the result of the referendum. The November bailout payment totalled about €8 billion.

And the confusion continued on 2 November after deputy prime minister – and Papandreou’s long-time political rival – Evangelo Venizelos said Greece should accept the rescue package without delay. The rift between Papandreou and members of his own Pasok party could lead to a no-confidence vote for the prime minister, with the cabinet meeting for an emergency session. As PEU went to press, reports emerged that Papandreou was preparing to stand down, a move which would allow a coalition government to take power.

Cushing glut cleared

Meanwhile, US crude prices stabilised at $92/b after the rally last week, which reduced WTI-Brent spread to a three month low.

“In our view, last week’s developments in the WTI market signal the first step in the clearing of the crude surplus in the US Midwest and Midcontinent,” said Goldman Sachs oil analysts led by David Greely. “Cushing crude inventories have drawn down by 10.4 million barrels since their April peak, taking them to around 50% of Cushing capacity – the lowest level for this time of year since 2007.”

US Department of Energy data showed Cushing levels were at 32.1 million barrels in the week ending 28 October, compared with 33.5 million barrels at the same time last year. Overall, US crude stocks built by 1.8 million barrels in the week, compared with a predicted 1.1 million barrel climb.

In US gas market, front month contracts were up, at $3.75/million British thermal units (Btu) compared with $3.59/million Btu last week. Prices started rising earlier in the week after the weather turned colder, but forecast milder temperatures saw prices fall away again.

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