MOSCOW — Oil prices hovered around US$77 a barrel Wednesday as investors took a pause from Tuesday’s rally fuelled by surging stock markets and stronger euro.
Benchmark crude for July delivery was down 34 cents to $76.60 a barrel London morning in electronic trading on the New York Mercantile Exchange. The contract rose $1.82 to settle at $76.94 on Tuesday.
Analysts say that investors are still worried about the state of the European economy despite a strong rally in the region’s stock markets.
“Concerns over Spain’s access to credit markets have not fully disappeared,” trade advisory firm Petromatrix said in a note.
Crude has jumped from $64 last month as investor concerns eased that Europe’s debt crisis will derail the global economic recovery and improving crude demand.
Oil traders, who often look to equities as a measure of overall investor confidence, were cheered by this week’s rally in stocks.
A strong rally in Asia lost momentum in Europe — Britain’s FTSE 100 was up 0.4 per cent after Japan’s Nikkei 225 closed 1.8 per cent higher. The Dow Jones industrial average soared 2.1 per cent Tuesday.
A stronger euro, which makes dollar-based commodities such as oil cheaper to investors with the European currency, also bolstered crude recently. The euro gave up some gains Wednesday, falling to $1.2296 from $1.2321 on Tuesday.
“Clearly, the price of oil is rallying due to a huge upswing in the Dow Jones and a weakening of the dollar index,” said Mike Sander of Sander Capital Advisors. “If that trend continues oil could go back above $80.”
Markets largely disregarded inventory data from the American Petroleum Institute, published after markets closed yesterday and which revealed a rise in both crude oil stocks and oil product stocks.
“The current price trend shows that movements on equity and foreign exchange markets are clearly more important at the moment than oil market fundamentals,” Commerzbank said in a note.
In other Nymex trading in July contracts, heating oil was steady at $2.0684 a gallon and gasoline dropped 1.6 cents to $2.1052 a gallon. Natural gas was steady at $5.191 per 1,000 cubic feet.
Brent crude shed 8 cents to $77.02 a barrel on the ICE futures exchange.
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