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Crude oil up 1% on easing Greece fears, Middle East turmoil

CommoditiesMay 28, 2012 03:51AM ET
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Investing.com - Crude oil futures were up during European morning trade on Monday, hitting a four-day high as fears over a potential Greek exit from the euro zone eased and after weekend turmoil in Syria raised concerns over a disruption to supplies from the region.

On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD91.77 a barrel during European morning trade, climbing 1%.

It earlier rose by as much as 1.1% to trade at USD91.90 a barrel, the highest since May 22. Prices touched USD89.28 a barrel on May 23, the lowest since November 1.

Market sentiment firmed after weekend opinion polls in Greece indicated that pro-bailout party New Democracy was leading the polls ahead of a general election next month.

The likelihood of Greece leaving the euro has been growing since early May, when anti-bailout political parties deprived pro-austerity parties of a majority at the polls.

The euro inched up from last week’s 22-month low against the U.S. dollar, while the dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.55% to trade at 82.09.

On Friday, the index hit the highest level since September 2010.

Despite the relief rally, the single currency remained vulnerable to further losses amid growing concerns over the fiscal health of Spain.

Ratings agency Standard & Poor’s cut the ratings on five Spanish banks on Friday and said it believes the country is entering a double-dip recession.

Adding to the gloomy environment, the president of Catalonia, Spain's wealthiest autonomous region, said on Friday it had few options to refinance over EUR13 billion in debt due this year.

Furthermore, a government source said on Sunday that Spain may recapitalize its fourth-largest bank, Bankia, which last week asked for EUR19 billion in funding.

There are worries that the region’s sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil. The euro zone accounted for nearly 12% of global oil consumption in 2010, according to data from British Petroleum.

Meanwhile, oil traders focused on ongoing violence in Syria, after an alleged government attack on the town of Houla killed at least 109 people over the weekend, according to reports.

The United Nations Security Council met on Sunday to discuss unfolding developments that brought a six week cease-fire to an end.

A lack of resolution in talks between Iran and world powers over Tehran’s nuclear program late last week provided further support.

Trading is expected to be subdued on Monday amid a lack of key economic data and a U.S. market holiday for Memorial Day.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery rose 0.8% to trade at 107.67 a barrel, with the spread between the Brent and crude contracts standing at USD15.90.

Brent crude, the European benchmark, is nearly 15% off its intraday high of USD128.38 hit on March 1.  

A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.

But revived talks between Iran and major powers over Tehran's nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.

Crude oil up 1% on easing Greece fears, Middle East turmoil

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