Concerns over Europe's debt crisis ease, with Italy and Greece putting in place new governments
Brent crude held above $114 on Monday, extending the gains of the previous
week on hopes of steady demand growth as concerns over Europe's debt crisis
eased, with Italy and Greece putting in place new governments to shore up the
Most markets, from Asian stocks and the euro to precious metals, rose in
hopes the new leaders will push through reforms and austerity measures to save
their nations from bankruptcy and fend off a wider financial meltdown. Oil also
gained on concerns the crisis over Iran's nuclear programme will worsen.
Brent crude gained 37 cents to $114.53 a barrel by 0605 GMT, after rising to
as much as $114.83. US oil traded 6 cents higher at $99.05, after touching
$99.69, the highest since July. On Friday, the US benchmark closed at a 15-week
high and posted a sixth consecutive weekly gain, while Brent pushed higher for
a third straight week.
"US crude prices have a further upside towards $102 this week, based on
technicals and support from developments in Europe," said Ken Hasegawa, a
commodity derivatives manager at Newedge Brokerage in Tokyo. "We have
already seen a big rebound in US crude of about $25 a barrel since the low they
touched in October."
The US benchmark had slipped to $74.95 on Oct. 4, the lowest this year, and
the contract has rebounded 32 percent since then. Hasegawa expects prices to
correct to about $95 a barrel as investors may book profits after they touch
The spread between Brent and US crude will remain at the current level of
about $15 for the rest of the year on steady demand for grades linked to the
European benchmark even as output improves in the North Sea and Libya, he said.
Brent is expected to fall to $111.30 per barrel, a low touched on Nov. 10,
while US oil may either hover around a strong resistance at $98.91 or retrace
to $97, says Reuters technical analyst Wang Tao.
Technocrat leaders in Italy and Greece are rushing to limit further damage
to their countries from the debt crisis. Italy's president asked former
European Commissioner Mario Monti to form a government in an economy whose debt
burden is too big for the euro bloc to bail out.
In Greece, Lucas Papademos took office on Friday. The former central banker
who oversaw his country's entry into the euro zone in 2002 must win a Wednesday
confidence vote in his cabinet before meeting euro zone finance ministers on
"The appointment of new leaders who are experienced economists in both
countries provides some light at the end of the tunnel," Ric Spooner,
chief market analyst at CMC Markets, said in a report.
"There is a better possibility of economic reforms to improve the
efficiency and competitiveness of both the Greek and Italian economies and
provide a platform for growth over the medium- to longer term."
Across the Atlantic, US consumer sentiment rose to a five-month high in
early November, reflecting an improved economic outlook and helping boost oil
prices on Friday.
"There seems to be nothing to suggest that they are about to go into a
double dip recession, with consumer confidence figures coming in better than
expected on Friday," said Ben Le Brun, market analyst at OptionsXpress, in
Adding to the positive economic news, the world's third-largest economy
Japan posted the fastest growth among industrialised nations in the third
quarter. To feed that growth as nuclear power output fell, the nation's
utilities consumed more than 13 times the amount of crude oil burnt in the same
month a year earlier.
On the supply front, investors worry the crisis over Iran's nuclear
programme could get out of hand.
US President Barack Obama said he and Russian President Dmitry Medvedev
discussed Iran, among other topics, at their meeting. Obama said he and
Medvedev "reaffirmed our intention to work and shape a common response so
we can move Iran to follow its international obligations when it comes to its