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Brent rebounds on Greek-debt optimism

Rise of $3 a barrel after opening at around $112/b

Brent crude jumped by almost $3 a barrel in London this morning, after opening at around $112/b.

The price rally followed an announcement by German leader Angela Merkel and French President Nicolas Sarkozy that they will help Greece to stay within the Euro zone. Crude prices fell on 14 September because of fears that a default by debt-strapped Greece would trigger a global recession and cut global oil demand.

The International Energy Agency and Opec have both cut their global oil demand forecasts for 2011 based on weak economic data. Both organisations have revised down their predictions for demand this year, by 200,000 barrels a day (b/d) and 150,000 b/d respectively.

WTI prices opened trading in London flat, at around $89/b, as a result of drawdown in US crude stocks. The US Department of Energy reported the country’s commercial stocks of crude oil fell by 6.7 million barrels last week, a much larger draw than the 3 million barrels forecast by analysts.

Large production shut-ins in the Gulf of Mexico, caused by a tropical storm last week, were mainly responsible for the stock draw. US oil production in the week-ending 9 September was down by 559,000 barrels a day (b/d) compared with the previous week, at 5.1 million b/d. US crude stocks, at 346.4 million barrels, are at their lowest levels for seven months.

US natural gas prices are holding firm, trading at just over $4/m Btu on 15 September. Analyst Stephen Schork said moderate weather had lowered domestic demand for gas and electricity, while storms along the Gulf and east coasts caused power outages, resulting in a 12% drop in electricity consumption.

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