The fear of feeble oil demand due to concerns over Europe’s growing debt woes and disputes on how to address the problem elevated borrowing costs. This weakened Brent crude on Friday as well as U.S. crude, both on their 2nd week of losses.
Now on its 7th week of losses, euro against the dollar was also weak intraday. Wall Street’s slightly up equities lifted U.S. oil briefly but stocks fell finishing low for 7 straight sessions. Policymakers’ disagreement over how to deal with the crises drove investor uncertainty higher. Germany doesn’t favor a larger role for the European Central bank and joint euro-zone bonds. Wall Street’s higher open caused by what was thought to be a strong holiday shopping start had U.S. oil rallying and Brent paring losses. However, the doubts casted by Europe’s crisis had stocks closing lower for the 7th straight session. Iran’s nuclear program and unrest in the Middle East also limited the slip of oil.
ICE Brent January crude at $106.40 was down by $1.38 against Brent’s average move of $105.98, its posted week loss was 1%. Settling at $96.77/barrel was U.S. January crude, up by 60 cents after posting a week loss of 64 cents. Tom Bentz, BNP Paribas Prime Brokerage Inc said equities may have helped, but they faded and the market is balancing between negative Europe economy concerns versus worries about oil sanctions against Iran and what the repercussions will be. Brent’s failing thrust its U.S. counterpart premium to lower than $10/barrel. Oil price instability was due to low crude volumes traded. Most traders were still on extended holiday after Thanksgiving and early market closure the following day. Brent trading volume was 48% less than its 30-day average; U.S. crude volume less than 57% its 30-day average.
On Thursday, Europe was speculated to cease from buying Iranian oil after an official from the French government wrongly proposed to bar Iranian oil imports. It strengthened the thought that European Union countries may shun OPEC producer’s oil sales to put a strain on Tehran’s nuclear program. Turkey and Arab influence demanded Syrian President Bashar al-Assad to end assault on pro-democracy demonstrators were 10 personnel died during an attack on an air force base. But Russia, a longtime ally, is against any foreign intrusion.