Oil prices rallied this week as stimulus bets and tensions in the Middle East offset concerns about Europe’s fiscal problems.
US Secretary of State Hillary Clinton said this week that Iran’s proposals at negotiations with six world powers over its uranium enrichment programme were “non-starters”, dampening expectations of a diplomatic solution to the nuclear crisis.
The Middle Eastern country, which is accused of developing an atomic weapon, has held a few rounds of talks with the six countries – including the five permanent members of the UN Security Council and Germany – which failed to result in any tangible progress.
Late in the week, more than half of Iranian MPs supported a bill that would block the Strait of Hormuz – a major shipping route used to transport a fifth of the world’s oil in response to sanctions that have reduced the country’s oil exports.
In the meantime, chairman of the Federal Reserve Ben Bernanke said in this week’s testimony to the US Congress that the recovery had been slower than expected and further stimulus action by the Fed was possible.
Gains in oil prices were curbed by Spain’s decision to reduce its growth forecasts for the next two years.
The GDP is now expected to contract 0.5 percent next year compared with the previous projection of a 0.2 percent increase, while the growth forecast for 2014 was cut to 1.2 from 1.4 percent previously.
The change in forecasts pushed Spain’s borrowing costs higher with yields on its benchmark 10 year bonds soaring to 7.26 percent.
This week’s inventories data was mixed. The report from the Department of Energy revealed that America’s crude stockpiles shed 800,000 last week, which was below expectations of a decline of over million barrels.
In addition, refineries operated at 92 percent of their capacity, down 0.7 percent from the previous week.
US light, sweet crude for September delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), ended the week at US$91.83/barrel.
September Brent crude closed at US$106.83/barrel on the ICE Exchange on Friday.
BP (LON:BP.) rose from 437 pence to 444.5 pence over the past five days of trading and fellow supermajor Royal Dutch Shell (LON:RDSB) climbed from 2,205 pence to 2,219 pence.
Tullow Oil (LON:TLW) advanced from 1,433 pence to 1,445 pence, while BG Group (LON:BG.) declined from 1,301 pence to 1,291 pence.