held steady above $107 per barrel on Friday, but prices were
headed for a third straight weekly drop as a worsening euro zone
crisis and weak U.S. economic data raised fears of a global
slowdown that could dent oil demand.
Worries about the
, already roiled by a Greek political chaos, mounted as Spain
slipped into a recession, while sluggish data out of the United
States sent worrisome signs about a still-fragile recovery at the
world's largest economy and top oil consumer.
Brent crude edged up 7 cents to $107.56 a barrel by 11:34 p.m.
EDT after slipping to as low as $106.62. Front-month Brent is on
track to post its largest three-week fall since May 2011 after
settling at the lowest level in 2012 on Thursday.
inched up 3 cents to $92.59, but is still headed for its largest
three-week fall since August 2011.
"We've got a bit of a perfect storm at the moment," Michael
McCarthy, a markets strategist at CMC Global Markets in Sydney
said, pointing to the worsening euro zone crisis, lower demand as
industrial output slows and bloated crude inventories in the
Debt crisis in the euro zone worsened as Spain's borrowing
costs shot up while its troubled banks suffered a credit ratings
cut. This added to worries of Greece's possible exit from the
common currency group as it does not have a government to
implement austerity measures in exchange for rescue funds.
Greece's exit has the "potential for a structural destruction
to Europe," McCarthy said. "We have no idea how this will pan
He added that it was "way too optimistic" to expect a quick
recovery in Europe as further credit downgrades will weigh on
Asian shares tumbled on Friday and were set for their worst
weekly showing since September while the euro hit a fourth-month
low on euro zone worries. The dollar index .DXY rose 0.27
New claims for U.S. jobless benefits last week held at levels
suggesting sluggish growth in hiring and factory activity in the
mid-Atlantic region contracted in May.
U.S. crude prices were supported by expectations that the
Seaway pipeline reversal would ease the oil glut at Cushing,
Oklahoma, its delivery point.
The first crude oil was expected to flow on the reversed
Seaway pipeline this weekend, a historic move to ease a Midwest
oil glut and bring depressed North American crude prices closer
to world market levels.
July Brent's premium to West Texas Intermediate (
) narrowed to $14.60. The premium had ended at $18.90 on
Wednesday, when the Brent June contract expired.
U.S. crude may bounce towards $96 next week as it has
technically hit the bottom, McCarthy said, although a weaker
demand outlook may push it down to $88 in the next month.
Investors are now eyeing a summit this weekend of G8 leaders
and nuclear talks between world powers and OPEC-member
next week. Brent surged to above $128 a barrel in March on supply
concerns amid tightening Western sanctions on Iran over its
disputed nuclear program.
The United States delayed a bill for new economic sanctions on
Iran's oil sector after Senate Republicans blocked the
legislation on Thursday saying they needed more time to study the
bill. The surprise move drew anger from Democrats who wanted
approval ahead of nuclear talks next week.
Leaders at this weekend's G8 summit will discuss pressures on
global oil markets and options they could take in response, a top
White House official said on Thursday, declining to specify
whether a release of strategic reserves would be on the
(Corrects dollar index rise to 0.27 percent, not 27
(Editing by Himani Sarkar)
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