Business | Oil & Gas

Oil rose on Friday to $114.79

Evidence of improving business morale in Germany helped bolster sentiment

  • By Dasha Afanasieva, Reuters
  • Published: 16:19 February 22, 2013
  • Gulf News

London: Oil rose on Friday as evidence of improving business morale in Germany helped bolster sentiment after two days of heavy losses.

German business morale jumped at its fastest pace in over two years in February, the Munich-based Ifo think tank said, pointing to a solid recovery in Europe’s largest economy after a dismal end to 2012.

Brent fell nearly 2 percent on Thursday, its steepest drop since November, during a two-day sell-off fuelled by worries that the US Federal Reserve could wind down its bond buying programme earlier than expected and that Saudi Arabia could raise its oil output.

Weak data in the US and Europe also added to concerns that the rally that began at the start of the year was overdone.

“The price drop was fundamentally not justified and we will see higher prices soon ... in the upcoming weeks,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

Brent crude for April rose $1.26 per barrel to a high of $114.79 before easing back to around $114.25 by 1025 GMT. US crude was at $92.94, up 10 cents, after hitting a six-week low in the previous session.

The Federal Reserve is re-examining its monetary policy, although economic data is still pointing to a tepid recovery, supporting the case for maintaining a stimulus programme.

The Fed’s asset purchases have resulted in a glut of liquidity that has fuelled demand for riskier assets such as oil in a climate of ultra-low interest rates.

US oil data this week was mostly bearish.

Oil demand fell by almost 2 percent in January from a year earlier, the American Petroleum Institute said. Crude oil stockpiles rose more than expected to 4.14 million barrels last week, the highest since last July, the Energy Information Administration said.

Oil found some support from rising tension between the West and Iran ahead of a resumption of talks next week.

Six world powers and Iran will meet for the first time in eight months on February 26 to try again to break a stalemate over the Islamic Republic’s nuclear programme, but analysts expect little major progress toward defusing suspicions of an Iranian quest for nuclear weapons capability.

The UN nuclear watchdog has said Iran has begun installing advanced centrifuges at its main uranium enrichment plant.

Iran could face further sanctions as US lawmakers are crafting a bill to stop the European Central Bank from handling business from the Iranian government.

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