Crude Oil Rebounds as Euro Strengthens on Signs Greece Near Agreement

Published: Jan 27, 2012

By Moming Zhou - Jan 27, 2012

Oil headed for its first weekly gain in three on signs Greece is near an agreement with its creditors and concern that tensions with Iran may disrupt oil supplies.

Prices increased as much as 0.8 percent after European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are “very close” to reaching an agreement on private-sector involvement this month and the euro strengthened. Iran has threatened to close the Strait of Hormuz in retaliation against the EU’s oil embargo.

“We had some positive news out of Europe and it’s supporting the euro and oil,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “With Iran hanging over the market, people are not going to sell oil.”

Oil for March delivery rose 36 cents, or 0.4 percent, to $100.06 a barrel at 11 a.m. on the New York Mercantile Exchange. Prices have climbed 1.6 percent this week and 17 percent in the past year.

Brent oil for March settlement gained 88 cents, or 0.8 percent, to $111.67 a barrel on the London-based ICE Futures Europe exchange.

“We’re just about to close a deal on private sector involvement between the Greek government and the private-sector community,” Rehn said at the World Economic Forum in Davos, Switzerland, today. An agreement may come “if not today, then over the weekend.”

The euro rose as much as 0.4 percent to $1.3161, its fifth consecutive increase. A stronger euro and weaker dollar boost commodities’ appeal as an alternate investment.
‘Upbeat Expectations’

“There are upbeat expectations about a resolution to the Greek negotiations,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Crude also increased on concern that Iran may close the Strait of Hormuz, the transit point for about a fifth of global oil, after the EU announced Jan. 23 that it will implement an oil embargo starting July 1 to pressure Iran over its nuclear program.

Iranian President Mahmoud Ahmadinejad said his country is willing to revive talks on its nuclear plans and accused Western countries of dodging discussions, the state-run Fars news agency reported yesterday.

Prices fell earlier as data showed the U.S. economy expanded less than forecast.

Gross domestic product climbed at a 2.8 percent annual rate in the fourth quarter, slower than the 3 percent growth forecast by economists surveyed by Bloomberg, a Commerce Department report showed.
U.S. Economy

“The market is disappointed that the economy is not as strong as people had hoped,” said Phil Flynn, an analyst at PFGBest in Chicago.

Federal Reserve policy makers said Jan. 25 that they were concerned about the economy’s lack of vigor, prompting a pledge to keep interest rates low into late 2014. Oil rose for two straight days after the Fed’s announcement.

“We’ve had wrestling between the slightly weaker than expected GDP number and the improving Greece outlook,” Lynch said.

Crude may rise next week on the EU embargo plan and after the Fed committed to keep interest rates near a record low, according to a Bloomberg News survey.

Fifteen of 32 analysts and traders, or 47 percent, forecast oil will advance through Feb. 3. Ten respondents, or 31 percent, predicted prices will drop and seven estimated there will be little change.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net