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U.S. oil stays near $84; Europe, China concerns linger
Concerns over euro zone debt, China inflation linger.
November 26, 2010 10:06 by Reuters
U.S. oil held steady near $84 on Friday, paving the way for its first weekly rise in three weeks, although ongoing concerns about a wider debt crisis in Europe and Chinese inflation continued to weigh in post-holiday thin trade.
Investors are treading cautiously, waiting to see how Ireland’s bailout will pan out and if more European countries will seek financial help. China may also step up measures to curb fast-rising inflation following a recent crackdown on commodities prices at the world’s second largest oil consumer.
U.S. crude for January remained on track for its first weekly rise in three weeks after posting the largest daily gain in four months on Nov. 24 on positive economic data from the United States.
The contract shed 5 cents to $83.81 a barrel at 0317 GMT. ICE Brent dropped 40 cents to $85.70 a barrel.
“Trade in currencies, equities and commodities are all very thin, but it could also be due to the fact that economic and (oil) inventories data are already factored in the market,” said David Taylor, a Sydney-based analyst at brokerage CMC Markets.
Oil prices are likely to stay rangebound between low and mid-$80s as the market keeps a close tab on the macroeconomic situation, focusing on euro-zone debts and inflation-fighting measures in China, he said.
The euro hovered near a two-month low against the dollar on persistent worries about a wider debt crisis in Europe.
“We know the IMF will back loans to Ireland but we don’t know how it will be implemented,” Taylor said, adding that the focus may also turn to Portugal’s debts as interest rates for its bonds have risen sharply.
China has intervened to control fast-rising consumer prices, raising widespread market talk of an impending interest rate rise, reinforced by an actual increase in banks’ required reserve ratios last Friday.
On Thursday, the country’s top economic planner said that a crackdown on commodity prices contributed to a widespread fall in futures in the last two weeks.
The country’s commodities exchanges have announced measures to raise margin requirements and widen daily price movement limits to curb speculation.
Separately, India has said it will step up crude imports by over 500,000 barrels per day (bpd) in the next fiscal year to feed new refineries and fill up storage tanks.
Meanwhile, Shell said on Thursday it was restoring production of Nigerian crude oil after repairing a pipeline damaged by oil theft in Africa’s top exporter last week.
(Editing by Himani Sarkar)