Oil steadies near $111 on Obama victory
Singapore - Brent futures steadied around $111 per barrel on Wednesday after uncertainties about the US elections came to an end with President Barack Obama’s re-election, although concerns about weak demand and Greece weighed on prices.
Worries about Iran’s nuclear dispute, negotiations to avert a looming fiscal cliff - nearly $600bn worth of spending cuts and tax hikes that risk pushing the United States into deep recession, and disruption to supplies due to escalating tensions in the Middle East are now expected to drive the market.
Front-month Brent futures were up 29 cents at $111.36 per barrel by 09:40, bouncing off the day’s low of $110.40. US crude was up 5c at $88.76 per barrel, off the day’s low of $87.87.
“Now the focus will be on the fiscal cliff discussions and on the Iranian dispute, all that is still ahead of us,” said Tony Nunan, an oil risk manager at Mitsubishi Corp in Tokyo.
“The market appears evenly balanced with economic worries on one hand and the geopolitical worries and winter drawdown supporting. We see high volatility, but sideways trading for the rest of the year.”
Greece remains another key focus area, where a key parliamentary vote on a new set of wage and pension cuts is set for Wednesday.
Greek protesters took to the streets against the new austerity measures, even though the parliament is expected to approve them by a narrow margin.
The euro zone faces the risk of “aggravation of the situation in Greece, with potential contagion effects to the rest of the area”, analysts at Spanish finance company BBVA said in a report.
But supply worries continued to support oil prices after Middle East violence escalated again.
Bombs exploded in three districts of the Syrian capital Damascus on Tuesday, killing and wounding dozens, while gunmen shot dead the brother of the parliament speaker in the latest rebel attack on a figure associated with the ruling elite.
Directly impacting oil supply out of Syria, an explosion also hit the main oil pipeline feeding a refinery on the western edge of the Syrian city of Homs on Tuesday, during fighting between rebels and army forces in the area.
Moreover, supply of the North Sea crude oil that underpins the benchmark Brent contract is set to slip in December, despite the restart of Britain’s largest oilfield, loading programmes showed.
US crude oil inventories fell slightly last week and product stocks rose, data from the American Petroleum Institute showed on Tuesday, confounding analysts’ expectations in the wake of Hurricane Sandy, which has caused widespread disruptions to East Coast refineries and terminals.
Inventory data from the Energy Information Administration is scheduled for release later on Wednesday.