OIL & GAS MARKET WRAP

The Oil and Gas wrap provides the latest oil prices from commodity exchanges in New York and London, gives a summary of the main corporate and macroeconomic news impacting the price of oil, a barometer of the strength of global economy.

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Wednesday, February 08, 2012

Oil rallies on inventories data, euro zone optimism

Oil rallies on inventories data, euro zone optimism

Oil prices surged this afternoon with US benchmark crude tacking on well over US$1 per barrel. Demand for oil futures was driven by a combination of signs that oil consumption in the US rose last week and optimism that Greece is inching closer to secure more financial aid.

A report from the American Petroleum Institute (API) showed a surprising drop of 4.5 million barrels in crude stockpiles in the US, while expectations were for a gain of over two million barrels.

Traders are now looking to today’s closely watched weekly inventories report from the Department of Energy. Last week’s report revealed a massive buildup of 4.2 million barrels, a result of a decline in crude demand from refineries.

Meanwhile, in Europe, a report in the Wall Street Journal said the European Central Bank (ECB) was ready to make concessions to help reach agreement with Greece on a new package of financial aid.

The ECB has agreed exchange its Greek bonds at a discount to reduce the struggling country’s debt burden by as much as €11 billion.

Greek Prime Minister Lucas Papademos is set to meet with other leaders of the ruling coalition today for another round of talks on further austerity measured demand by the EU, the ECB and the IMF – collectively known as the Troika.

Is the policymakers fail to reach an agreement on the measures, while include a 20 percent reduction of wages and more payoffs in the budget sector, Greece will miss out on the next bailout and almost certainly go into bankruptcy, which could trigger a financial meltdown in Europe.

Demand for oil is also supported by fears that Iran could soon halt oil supplies to Europe in response to an embargo imposed by the EU last month.

Earlier this week, Iranian state media reported that the Middle Eastern country, which is accused of illegally developing a nuclear weapon, was ready to stop oil shipments immediately.

Europe initially planned to gradually reduce dependence on Iranian oil and phase out imports by July this year to allow itself enough time to find other suppliers and prevent a sharp increase in oil prices.

EU countries imported 600,000 barrels of oil per day from Iran in the third quarter of 2011.

US light, sweet crude for March delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), rose US$1.45 to US$99.86/barrel in morning trade in New York.

March Brent crude added 34 cents to reach US$116.63/barrel on the ICE Exchange this afternoon.

Today’s top risers in the oil and gas sector were:

Europa Oil & Gas (LON:EOG), up 10.5 percent at 10.65 pence at midday

Matra Petroleum (LON:MTA), up 9 percent at 0.8 pence

Bayfield Energy (LON:BEH), up 6.5 percent at 47.5 pence

Gold Oil (LON:GOO), up 5 percent at 2.65 pence

Hardy Oil & Gas (LON:HDY), up 4.5 percent at 168.5 pence

The top fallers were:

Trap Oil (LON:TRAP), down 9 percent at 22.11 pence at midday

Tower Resources (LON:TWR), down 5.5 percent at 3.96 pence

Caza Oil & Gas (LON:CAZA), down 4.5 percent at 11.32 pence

Nostra Terra Oil & Gas (LON:NTOG), down 4.5 percent at 0.435 pence

Lansdowne Oil & Gas (LON:LOGP), down 4.5 percent at 31.2 pence


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