NEW YORK (DTN) — New York Mercantile Exchange oil futures rallied in overnight trade amid supply worries and hope that a potential Greek debt deal and a European Union fiscal compact would boost economic growth and ensure higher demand for oil.
The optimism that buoyed oil and equities markets this morning came after 25 of the 27 EU countries agreed to a new treaty that would ensure closer supervision of their budgets in an effort to prevent a debt crisis in the future. Britain and the Czech Republic didn’t join the compact.
Meantime, Greek Prime Minister Lucas Papademos raised hopes that a deal would be reached this week to avoid a potentially chaotic debt default.
Greece is negotiating with its bondholders over debt restructuring.
Success of the talks is crucial because Athens expects to get a new bailout fund. As a result, the euro rose against the dollar, which in turn boosted oil prices.
The oil upside was also underpinned by lingering worries over risks to supply, with tension between Iran and the West escalating as the United States steps up pressure on Tehran to halt its nuclear program. U.S.
lawmakers were considering additional sanctions on top of an EU embargo on Iranian oil.
March Brent on ICE Futures was the most actively traded contract, with high volatility reportedly caused by computer-driven trading. A surge in volume had occurred as the Brent market went through a key buying level identified by one automated system.
March Brent futures briefly jumped to a two-week spot high of $113.90 bbl while March West Texas Intermediate crude futures on the NYMEX posted a three-session high on the continuation chart at $100.69 bbl, with the Brent premium over WTI now at $12.17 bbl. NYMEX February heating oil futures soared to a two-week spot high of $3.1040 while February RBOB futures stayed within Monday’s price range.
Also, a potential strike by U.S. oil refinery workers this week and the prospects of cold weather next week were supported the oil rally, said analyst Thomas Finlon at Energy Analytics Group in Jupiter, Florida.
Later today, oil traders will turn their attention to weekly oil supply data, with some analysts expecting to see a build for crude stocks and draws for products supply.