Oil prices have been buoyed by the prospect of progress by European political leaders in reaching a deal to shore up the Eurozone’s persistent debt woes, despite media reports that the latest round of meetings is not going smoothly.
A comprehensive plan on Eurozone debt is earmarked for announcement on the 26 October.
At the time of writing, Brent is trading at $111.65 and WTI at $ 87.90, with the spread between the two remaining historically wide, despite narrowing from an all-time high of over $27.
A $113 Brent price was sufficient to prompt the IEA to make 60 million barrels from the strategic reserves of member countries (chiefly the USA) in a bid to quell prices branded damaging to economic recovery in consumer countries.
Disruptions in the North Sea and in Nigeria, reports of export shutdowns at the Iraq-Turkey export pipeline, and news that Libyan crude production will take time to re-fill domestic supplies before reaching European markets, have also supported prices in the face of weak underlying macroeconomic data from consumer countries.
Resilience in asian markets is also holding up prices, with positive export and industrial production data from Japan and China suggesting stronger than expected demand growth.
Demand growth has been slowing consistently, with both OPEC and the IEA making successive demand growth downgrades in recent monthly reports. While futures contracts fell off by 0.5% in early trading today, they remain above the levels seen during the summer when the oil demand outlook for the second half of 2011 was significantly stronger.
