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Oil price pressures ease after Thursday's sharp gains | Oil price pressures ease after Thursday's sharp gains |
(1 day later) | |
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Oil prices have retreated from Thursday's multi-year highs amid optimism producers could offset a drop in supply caused by unrest in Libya. | 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 $112.33 a barrel, after almost breaking through the $120 mark earlier in the week. | Brent crude was trading at $112.33 a barrel, after almost breaking through the $120 mark earlier in the week. |
US light crude was back at $98.26 a barrel having earlier surged past $100. | US light crude was back at $98.26 a barrel having earlier surged past $100. |
Reports suggest Saudi Arabia has increased its oil production by almost 10% to offset production shortages resulting from the unrest. | Reports suggest Saudi Arabia has increased its oil production by almost 10% to offset production shortages resulting from the unrest. |
Global stock markets gained ground after the threat of rocketing oil prices receded. | Global stock markets gained ground after the threat of rocketing oil prices receded. |
Leading European markets Paris and Frankfurt maintained rallies into the afternoon, while London's FTSE 100 index also caught up after lunch after being suspended all morning because of a technical fault. | Leading European markets Paris and Frankfurt maintained rallies into the afternoon, while London's FTSE 100 index also caught up after lunch after being suspended all morning because of a technical fault. |
On Friday, 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. | On Friday, 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. | 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. | 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. |
Recovery 'at risk' | Recovery 'at risk' |
However, IEA chief economist Dr Fatih Birol warned that even if oil prices return to their pre-crisis levels, they still remain dangerously high and could pose a risk to the global economy. | However, IEA chief economist Dr Fatih Birol warned that even if oil prices return to their pre-crisis levels, they still remain dangerously high and could pose a risk to the global economy. |
"Lets try to remember that before anything started to happen in the Middle East, in Egypt, the price was about $95 - not very low compared to current levels," he told BBC World Service. | "Lets try to remember that before anything started to happen in the Middle East, in Egypt, the price was about $95 - not very low compared to current levels," he told BBC World Service. |
"And if this turmoil calms down - and I hope it does, quickly - if the prices are still $90-95, there is still a significant risk they could derail the economic recovery." | "And if this turmoil calms down - and I hope it does, quickly - if the prices are still $90-95, there is still a significant risk they could derail the economic recovery." |
He added that the events in Libya and elsewhere were only making the situation even more grave. | He added that the events in Libya and elsewhere were only making the situation even more grave. |
"We should start to understand that the age of cheap oil is over," he added. | "We should start to understand that the age of cheap oil is over," he added. |
'Fear factor' | 'Fear factor' |
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. |
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. | 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 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." | "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. | 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 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." | "I think Opec wants to see higher oil prices." |