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Oil price pressures ease after Thursday's sharp gains | Oil price pressures ease after Thursday's sharp gains |
(about 4 hours later) | |
Oil prices have retreated from Thursday's multi-year highs amid optimism producers could offset a drop in supply caused by unrest in Libya. | |
Brent crude was trading at $112.65 a barrel, after almost breaking through the $120 mark i the previous session. | |
US light crude was at $97.49 a barrel having surged past $100. | |
Reports suggest Saudi Arabia has increased its oil production by almost 10% to offest production shortages resulting from the unrest. | |
Global stock markets gained ground after the threat of rocketing oil prices receded. | |
Leading European markets Paris and Frankfurt were up about 0.5% in early trading - though London's FTSE 100 index was suspended due to a technical fault. | |
Earlier, Singapore's STI stock index and Hong Kong's Hang Seng saw increases of more than 1% while markets in South Korea, Japan and Taiwan also gained. | |
'Verbal finesse' | 'Verbal finesse' |
Analysts said that the mood had been helped by comments from Saudi Arabia and the International Energy Agency (IEA). | Analysts said that the mood had been helped by comments from Saudi Arabia and the International Energy Agency (IEA). |
Saudi Arabia has said that it would step in to fill any shortfall in supply should it be needed now, or should the Libyan situation deteriorate. | |
Reuters news agency quoted an oil industry source saying that Saudi had increased production by 700,000 barrels a day to more than 9 million a day in total. | |
At the same time, the IEA said that Libyan production had been less affected than many observers had first forecast. | At the same time, the IEA said that Libyan production had been less affected than many observers had first forecast. |
Analysts said that the markets want to see crude supplies becoming available as and when they are needed. | Analysts said that the markets want to see crude supplies becoming available as and when they are needed. |
The worry is that if oil prices climb too high, then they will slow global economic growth, and hurt consumers and company profits. | |
Trying to predict the oil price when it is being driven by geopolitical events, rather than the fundamentals of supply and demand, is particularly difficult, analysts say. | |
"The fear factor in the market remains high, as the extent of contagion remains unknown," said Barclays Capital. | |
"The price correction, should the situation in the Middle East ease somewhat or in the event of Opec production increases, is likely to be quite sharp." | |
However, others argued that the drop in the price of oil seen on Thursday afternoon would be short lived. | |
"I think oil prices are going to trade higher, even with Saudi assurances," said Tom Kaan at Louis Capital Markets in Hong Kong. | |
"I think Opec wants to see higher oil prices." |