Oil steady near $84


Reuters April 23, 2010

SINGAPORE: Oil was steady near $84 as expectations of rising demand buffered the negative effect on commodities of risk aversion tied to a potential default by Greece.

Investors sought a safe haven in the dollar, boosting it by almost 0.5 percent on Friday against a basket of currencies and sending the euro to a one year low.

Although a stronger dollar usually means more expensive oil imports for emerging nations, demand in leading Asian economies, including China and India, remains unabated this year and is set to grow seasonally in coming months in the agriculture and transport sectors.

"We are going to see more demand coming in spring and summer and that is going to push prices higher," said Peter McGuire, managing director of Commodity Warrants Australia in Sydney, adding that he expected oil to approach $90 in June.

US crude for June delivery gained 5 cents to $83.74 a barrel by 0308 GMT, after reversing a two-dollar intra-day drop on Thursday. It was less than $4 from an 18-month high above $87 reached on April 6.

"The only thing that can bring it down is a continued upswing of the US dollar index to 84 or 85," McGuire said. The dollar index against the currency basket was near 82 on Friday.

US crude was heading for its first weekly increase in two weeks, shrugging off gains in the nation's crude, gasoline and distillate stockpiles last week.

But it was still trading almost $2 below ICE Brent for June, the benchmark for most of Europe, Africa and Asia, which shed 3 cents to $85.64.

Most traders consider Brent better represents world oil balances because US crude prices can be locally affected by gluts at the land-locked Cushing, Oklahoma pricing point, where stocks jumped last week.

North Sea crude supplies will tighten over the next month due to offshore equipment maintenance and Brent is also responding to evidence of surging Chinese demand, analysts say.

China's economy will probably grow by about 9.9 percent this year, compared with a previous outlook of 9.1 percent, according to forecasts by the Chinese Academy of Social Sciences (CASS) published on Friday.

Sentiment towards Greece considerably soured on Thursday after the European Union said Greece's budget deficit was worse than feared and Moody's cut its rating of Greek government debt.

Iran's Revolutionary Guards successfully deployed a new speed boat capable of destroying enemy ships in war games that began on Thursday in the Strait of Hormuz, a chokepoint for most of the oil produced in the Middle East.

News that US Vice President Joseph Biden expected new U.N. sanctions on Iran by late April or early May also was supportive to oil, as was a pipeline blast in the northern Iraqi province of Nineveh, which was likely to affect oil exports via the Kirkuk-to-Ceyhan pipeline for as long as a week.

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