Oil prices generally improved today with July Brent Crude reaching US$78/barrel, while US light, sweet crude for June delivery, which was the most traded contract on the New York Mercantile Exchange (NYMEX), rose to US$71.76/barrel.
Crude prices rebounded after hitting a three month low earlier today, still under pressure from the European fiscal crisis with investors apparently having little faith in the EU’s ability to tackle its debt problem with a number of euro zone member states facing a debt crisis similar to that which led to a €110 billion bailout of Greece to allow it to avoid a default. The EU has recently agreed on a €750 billion bailout fund to back up other euro zone members with soaring sovereign debts with the biggest contribution coming from Germany, where public opinion polls and a recent election campaign have shown staunch opposition to the government’s agreement to rescue Greece and participate in the bailout deal.
The recent developments in the debt crisis have only “bought time” but did not provide a solution to the problem with the issue of introducing uniform economic regulations for the EU yet to be decided upon.
The debt crisis has muddied the outlook for oil demand and boosted the US dollar to make dollar-denominated commodities such as crude more expensive for holders of other currencies to dent demand.
The demand for oil does indeed seem to be falling as last week’s inventories reports from the American Petroleum Institute (API) and Energy Information Administration (EIA) showed further build-ups in US crude stockpiles.
Blue chip oil and gas producers did well today. BP (LSE: BP) was in the lead with a gain of nearly 3%. Fellow supermajor Shell (LSE: RDSB) added 1%, while Cairn Energy (LSE: CNE), BG Group (LSE: BG) and Tullow Oil (LSE: TLW) climbed 2.5%, 2% and 1.5% respectively.
Oil and gas engineering firms followed with Amec (LSE: AMEC) and Petrofac (LSE: PFC) rising 1.5% and 0.5% respectively. Most midcaps were in decline. Dana Petroleum (LSE: DNX), Melrose Resources (LSE: MRS) and Soco International (LSE: SIA) shed nearly 1.5%. Dragon Oil (LSE: DGO) lost less than 1%, while Salamander Energy (LSE: SMDR), Premier Oil (LSE: PMO) and Heritage Oil (LSE: HOIL) were flat.
JKX Oil & Gas (LSE: JKX) went against the tide, tacking on 1%.
Wood Group (LSE: WG) posted a small gain, while fellow services company Wellstream Holdings (LSE: WSM) declined 1.3%.
Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) and Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) led the juniors, rallying 18.5% and 14% respectively.