--Spanish bank bailout eases economic woes
--China, No. 2 oil consumer, imports record volumes in May
--Eyes on OPEC, Iran, oil market outlooks
NEW YORK--Crude oil futures prices were little changed Monday, down
from highs set as news from Spain and China stemmed concerns of
deepening economic weakening that recently sank prices to their lowest
levels since October.
Spain agreed to a $100 billion euro ($125 million) European Union
bailout for its struggling banking sector, while data from China,
showed the world's second-biggest oil consumer, imported record
volumes of crude oil in May.
Worries over a contagion effect throughout Europe if Spanish banks
failed, and concerns of slowing oil demand in China helped fuel a
sharp fall of 18% in U.S. oil futures prices in May and have kept in a
nervous range of $80 to $90 a barrel in recent weeks.
The International Energy Agency, the energy policy watchdog for the
major industrialized nations, projects China will be the engine of
global oil demand growth this year, accounting for 400,000 barrels a
day of an expected world-wide rise of 800,000 barrels a day. The IEA
projects European oil demand will drop by 300,000 barrels a day, while
U.S. demand is expected to fall by 200,000 barrels a day.
"Spain's banks get cash and oil gets 100 billion reasons to rally, or
if you talk in dollars, 125 billion reasons to rally," said Phil
Flynn, analyst at Price Futures Group in Chicago. "The new economic
law of "bailouts are bullish" is inspiring the oil market. While no
one believes that this is the end of the problems for the Spanish
banks or the euro zone as a whole, it does give oil a reason to
bounce."
"As the euphoria of a...bailout of Spanish banks starts to fade, so
does the rally in crude," said Matt Smith, an analyst at Summit
Energy.
The impact of the Spanish move, which helped support the euro against
the dollar, began to fade early Monday, with crude oil trimming
earlier gains and turning briefly lower. A rising dollar tends to
discourage investors using foreign currencies from investing in
dollar-based crude-oil futures
Light, sweet crude oil for July delivery on the New York Mercantile
Exchange was trading 7 cents lower, at $84.03 a barrel, after moving
in a range of $83.96 to $86.64 since Friday's settlement. Crude prices
slipped by a total of 92 cents a barrel in the previous two sessions
on worries over slowing oil demand.
July ICE Brent crude was 3 cents lower, at $99.44 a barrel.
Traders said the oil market was biding time ahead of busy calendar in
coming days. Ahead of its oil output policy meeting Thursday in
Vienna, the Organization of Petroleum Exporting Countries is to issue
its monthly oil market report on Tuesday, when the U.S. Energy
Information Administration is to issue its latest outlook. The IEA's
latest projections for global oil supply and demand is due out on
Wednesday, the same day as the EIA's widely watched U.S. oil inventory
and demand statistics are released.
The market is closely track developments ahead of Sunday's Greek
elections, which could determine whether the fiscally challenged
nation quits the euro.
Elsewhere, Russia's foreign minister is reported to be headed to Iran
on Wednesday ahead of crucial talks set for Moscow on June 18-19 about
Iran's nuclear program as tougher sanctions are crimping Iran's oil
production. As a July 1 EU embargo on Iranian crude imports nears,
Saudi Arabia has boosted oil output sharply to cover potential lost
supplies, and it has achieved a stated goal of driving oil prices down
in recent weeks.
Iranian officials have denounced the moves to raise output and the
issue promises to dominate headlines from OPEC, though the Saudis are
unlikely to turn back the taps without a sustained price drop, OPEC
delegates and analysts have said.
Reformulated gasoline blendstock futures for July were up 0.18 cent at
$2.6870 a gallon, while July heating oil was 0.40 cent higher at
$2.6764 a gallon.
-Write David Bird at david.bird@dowjones.com
(END) Dow Jones Newswires
June 11, 2012 03:55 ET (07:55 GMT)
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