Oil prices stable as traders look to US recovery

19 December 2010

US Treasury purchase worth $600bn demonstrates commitment to growth

The oil market remained largely stable, hovering around $90 a barrel as global oil demand growth continues to recover, although warnings over the strength of the US’ economic recovery continued to be heard.

US benchmark West Texas Intermediate (WTI) contracts remained below $90 a barrel, dipping slightly and ending the day at $88.30 a barrel, down $0.92 a barrel from six days earlier when it was valued at $89.22 a barrel.

The European crude oil market moved up further with Brent crude prices reaching $91.99 a barrel, up $0.57 a barrel from $91.57 a barrel.

The 12-crude basket of exports from the member states of the international oil producers group, Opec rose again, averaging $88.22 a barrel on 15 December. This is up $0.76 a barrel on the previous week, which settled at 87.46 a barrel.

The US’ Energy Information Administration (EIA) reports crude oil stocks at 346 million barrels on 10 December, a decrease 9.9 million barrels on the previous week, but up 13.6 million on levels at the same time in 2009.

The US Federal Reserve’s Federal Open Market Committee (FOMC) stated that the US recovery was not yet strong enough to reduce unemployment, but added that it maintains its commitment to growth by holding interest rates unchanged and sticking to its $600bn Treasury bond purchase.

According to analysts at the UK’s Barclays Capita,l the statement put oil prices under pressure, but market fundamentals continue to improve. Demand forecasts for 2010 have been revised upwards across the board, averaging up 1 million barrels a day (b/d).

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