Oil near $100 as Greece approves austerity cuts
February 13, 2012 (WPVI) -- Oil prices rose to nearly $100 a barrel Monday after Greece's Parliament approved new austerity measures that should secure a bailout to avoid bankruptcy and concerns lingered about Iran's crude supply.
By early afternoon in Europe, benchmark crude for March delivery was up 93 cents at $99.60 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.17 to settle at $98.67 on Friday.
In London, Brent crude was up $1 at $118.31 a barrel on the ICE Futures exchange.
The vote by Greek lawmakers - which came as rioters in central Athens torched buildings, looted shops and clashed with riot police - paves the way for Greece's European partners and the International Monetary Fund to release $170 billion (¬130 billion) in new rescue loans.
Without the bailout, Greece likely would default on its debt next month and leave the eurozone - a scenario expected to roil global markets.
The auspicious developments in Greece "should increase risk appetite and thus give buoyancy to commodity prices," said a report from Commerzbank in Frankfurt.
But it also said a possible change of government after April's Greek elections could endanger the austerity measures. "The sovereign-debt issue is thus likely to keep the markets on tenterhooks for quite some time yet," Commerzbank said.
Oil prices have hovered near $100 for the last few months as signs of an improving U.S. economy bolstered investor confidence. However, the University of Michigan's measure of consumer confidence fell in February, and some analysts are blaming higher gasoline prices.
"The problem is that gasoline prices have recently jumped and this appears to have more than offset the positive developments," Capital Economics said in a report.
Some analysts expect weak global economic growth this year will push prices lower. The International Energy Agency said Friday that global oil demand will likely grow less than 1 percent this year.
"To be bullish from here, one would need to believe a supply disruption is coming," Morgan Stanley said in a report. "With fundamentals weakening, we believe that any further upside is unlikely without a supply shock."
Sanctions by the United States and the European Union against Iran's oil exports also are keeping a floor under prices.
"The geopolitical risk premium may increase further this week given that several (oil tanker) operators are now purposely shunning Iran due to questions surrounding the validity of EU-based insurance in light of the sanctions," said analysts at JBC Energy in Vienna. "We expect sanctions on Iran to remain in place with substantial repercussions on its oil industry."
JBC also noted the decline in Iran's oil output - estimated to be down by over 200,000 barrels a day since August - due to the lack of maintenance and investment in Iran's oil fields.
"Foreign companies have exited Iran in large numbers over recent years, cutting massively into the oil and gas supply potential of the country," JBC said.
In other energy trading, heating oil was up 1.25 cents at $3.1946 per gallon and gasoline futures added 4.18 cents at $3.0167 per gallon. Natural gas slid 5.5 cents to $2.422 per 1,000 cubic feet.
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