Oil up on banks' Europe move
Singapore, September 16, 2011
Oil was headed for a weekly gain on Friday after central banks launched coordinated action to boost European bank funding, easing concern about falling oil demand from industrialised consumers.
Brent crude gained 56 cents to $112.86 by 0400 GMT, with the November contract up 1.7 percent this week. US crude rose 19 cents to $89.59, up 3 percent this week.
US Treasury Secretary Timothy Geithner will discuss with European finance ministers on Friday the possibility of leveraging the euro zone's bailout fund to make it more effective in fighting the region's debt crisis.
Industrial output in top oil consumer the United States edged higher in August and consumer prices rose more than expected, reinforcing expectations the Federal Reserve will offer only modest stimulus measures.
"Fundamentals don't look too bad for oil, it's just that the macroeconomy has been keeping the market down," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
"We are still nowhere near out of the woods. They are just barely keeping the economy from falling off a cliff, but there is no structural solution to the European sovereign debt problem."
Major central banks around the world will cooperate to offer three-month US dollar loans to commercial banks in order to prevent money markets from freezing up in the wake of Europe's debt crisis.
Asian stocks jumped on Friday and the euro steadied, after rising sharply the previous day, as investors hoped for a big policy move from European finance ministers to combat the debt crisis.
Geithner will hold talks with EU ministers in Poland on Friday and will propose that the European Financial Stability Fund, a 440 billion euro fund set up in May 2010, be used in a way similar to an emergency loan fund created by the US Treasury and the Federal Reserve in 2008 to thaw frozen credit markets, sources said.
New claims for US jobless aid rose unexpectedly last week and factory activity along much of the Eastern seaboard contracted early this month, bolstering the case for more action to support the struggling economy.
The economic weakness is now being reflected in US oil demand readings. The nation's total fuel consumption over the past four weeks fell 0.9 percent from a year earlier, while gasoline use over the summer declined to an eight-year low, according to the Energy Information Administration.
The International Energy Agency said on Thursday it was formally ending its release of oil from emergency reserves to help cover a shortfall caused by the loss of Libyan output, deeming the move successful. - Reuters