New York: Oil prices rose on Friday as German business sentiment improved, but crude futures still fell by the largest weekly margin of 2013 after a sell-off in commodities markets earlier last week.
German business morale increased in February at the fastest pace in more than two years, the Munich-based Ifo think tank said, suggesting a rebound in Europe’s largest economy after a dismal end to 2012.
Brent crude rose 57 cents to settle at $114.10 a barrel, but was down 3 per cent on the week. US crude futures rose 29 cents to settle at $93.13 a barrel, but were down 2.8 per cent last week.
Oil fell sharply on Wednesday and Thursday on concern that the US Federal Reserve may wind down its massive bond buying program earlier than expected.
Minutes from the Fed’s recent policy meeting, released on Wednesday, suggested the central bank is re-examining its mid-term monetary policy, including its schedule for bond buying and holding interest rates near zero, which has served to drive demand for risky assets like oil.
Prices also eased after oil industry sources earlier last week said Saudi Arabia, the world’s top crude oil exporter, expects to lift output in the second quarter, although the size of the production boost was not specified.
Traders on Friday tested oil’s lower trading levels, and analysts said a price recovery could be short-lived if economic data this week do not signal more demand for crude.
“The height of the bounce - whether today or into this week - will provide an indication of whether oil market bullish sentiment is resilient or whether further urgent long liquidation is on tap,” said energy specialist Tim Evans at Citi Futures in a research note.
Further weak economic data in the US and Europe has added to concerns that a first-quarter rally for crude has been overdone. Brent is still up by almost 3 per cent this year.
A report from the European Commission on Friday forecast that the euro zone economy will contract again in 2013, and caution ahead of last weekend’s Italian election weighed on the euro, which fell for a third day, helping to limit gains in oil prices.
Concerns that impending sharp automatic US spending cuts due to take effect on March 1 also weighed on oil and equity markets.
US March RBOB gasoline futures were up nearly 2 cents and March heating oil was little changed.
The March refined products contracts, due to expire this week, were supported by US government data released on Thursday showing inventories fell more than expected last week.
On Friday, weekly data from the US Commodity Futures Trading Commission showed hedge funds and other large speculators had cut their bets on higher US crude oil prices by 13,085 futures and option contracts in the week to February 19 to 231,692.
Tension between the West and Iran ahead of a resumption of talks on Tehran’s controversial nuclear program this week continued to support oil prices.
Six world powers and Iran will meet for the first time in eight months on February 26, but analysts remain sceptical that the talks can resolve an ongoing dispute over whether Iran is attempting to develop nuclear weapons.
The UN International Atomic Energy Agency (IAEA) said on Thursday that Iran has installed advanced centrifuges at its main uranium enrichment plant and Tehran may face more sanctions as US lawmakers craft a bill to stop the European Central Bank from handling business from the Iranian government.