Brent rises by $1.00 after falling to 18 month lows

22 June 2012 13:30  [Source: ICIS news]

SINGAPORE (ICIS)--ICE Brent crude futures rose more than $1/bbl on Friday as bargain hunters returned to the market following sharp falls in recent days which pushed Brent to 18 month lows amid concerns over the global economy.

Weak economic data from the US and China and a credit rating downgrade of global banks were the focus of macroeconomic concerns.

At 11:39 GMT, August Brent crude on London’s ICE futures exchange was trading at $90.21/bbl, up by 98 cents/bbl from the previous close. Earlier, the North Sea benchmark rose to a session high of $90.47/bbl, up by $1.24/bbl.

August NYMEX light sweet crude futures (WTI) were trading at $78.63/bbl, up by 43 cents/bbl on the previous close. Earlier, the US benchmark climbed to a session high of $79.01/bbl, up by 81 cents/bbl.

Crude prices had tumbled more than $3/bbl on Thursday amid concerns over the impact of weak global economy on oil demand growth. Front month August Brent futures closed at $89.23/bbl, its lowest level since 1 December 2010.

The crude value decline on Thursday followed the release of weak Chinese manufacturing data which revealed a further fall in factory output for the eighth successive month.

US economic data also revealed that US factory output grew at its lowest level in 11 months while US unemployment claims revealed only a modest decline, raising further concerns that the US economy was weakening.

Meanwhile, further negative pressure on crude values was generated by credit ratings agency Moody’s who downgraded 15 of the world’s leading banks and financial institutions. The banks were downgraded amid concerns over their exposure to risks in their capital market activities.

Eurozone debts remain a major concern. Interest rates on Spanish Government bonds repayable in two, three and five years hit 16 year highs on Thursday, with the yield on the five year bond rising to 6.07% from 4.96% in May.

Meanwhile, an independent audit reported that Spanish banks will require up to €62bn ($78bn) of additional funding in order to prevent their collapse. 

($1 = €0.80)

By: James Dennis
+65 6780 4359

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