Brent slips, EU optimism keeps price above $111

Saturday, 29 October 2011 00:34 - - {{hitsCtrl.values.hits}}

Reuters: Oil slipped on Friday after rising around 3 percent in the previous session, but optimism surrounding Europe’s rescue initiatives kept prices heading for weekly gains, with U.S crude looking to post it best week since February.

Data this week has been positive, with the U.S. economy growing 2.5 percent in the third quarter, its fastest pace in a year, and an index of China factory output returning to growth after three months of contraction.

Brent crude edged down 38 cents to $111.70 a barrel by 0704 GMT, heading for a weekly gain of almost 2 percent.

U.S. crude fell 78 cents to $93.18, still headed for a weekly rise of 7 percent, its biggest gain since the week ended Feb. 27.

“You got an initial knee-jerk reaction yesterday with prices going up, and probably there’s some selling going on now, based on the reality that it’s still a way to go to solve the problems,” said Tony Nunan, a risk manager with Mitsubishi Corp. based in Tokyo. “When people have more time to look at it and analyse it, they will realise there are not a lot of details on the European Financial Stability Facility Fund (EFSF),” he said, adding that Italy’s problems remained an issue.

But crude oil prices still look healthy, he added.

“Technically and fundmentally, crude oil prices look good. The essential thing is that Europe delivered. Although there are still a lot of problems left, there was some kind of an outcome that was acceptable to the market.”

On Thursday, European leaders struck a deal with private holders of Greek debt to write down half their holdings and agreed to boost the region’s rescue fund.

U.S. President Barack Obama said the deal had calmed global markets and it was now important the countries follow through on implementation of the pact.

Financial markets also rallied strongly on Thursday after the deal, and Hong Kong shares traded higher on Friday, set for their best week in almost 2-1/2 years.