Oil prices edged up in volatile trading on Monday as optimism that European officials and banks can tackle the eurozone debt crisis lifted markets even as scepticism about any solution curbed momentum. Oil prices rallied from steep early lows as European equities and the euro bounced on a better-than-expected German sentiment survey and speculation of more support from the European Central Bank.
Eurozone officials are working on ways to magnify the financial firepower of the eurozone's rescue fund, a senior European Central Bank policymaker said. But other eurozone officials played down reports of emerging plans to halve Greece's debts and recapitalise European banks, evaporating some early optimism and bullish sentiment.
Crude prices briefly turned lower on a report that new single-family home sales in the United States fell in August to a six-month low. The report pressured the euro, lifted the dollar, and curbed Wall Street's initial rise. "The market has come down a long way and most of the bad news seems now to be priced in," said Christopher Bellew, oil broker at Jefferies Bache. "Equities have stabilised."
The Dow and S&P 500 stock indexes were higher in choppy trading and both equities and oil were expected to be supported after suffering steep losses the previous week. Brent crude for November delivery edged up 20 cents to $104.17 a barrel by 2:53 pm EDT (1853 GMT). The $101.66 intraday low the weakest front-month Brent price since August 9. US November crude rose 39 cents to settle at $80.24 a barrel, having bounced off $77.11, the weakest intraday price since the 2011 low of $75.71 hit on August 9.
Both Brent and US crude prices were attempting to stabilise after falling to six-week lows and last week posting weekly losses of more than 7 and 9 percent, respectively. Brent and US crude trading volumes were just below half million lots traded, under their respective 30-day averages. "Despite a bounce in the stock market, this morning's new six-week lows per front-month (US crude) keep this liquidation phase alive for now as macro guidance and eurozone uncertainties are providing little encouragement toward a purchasing strategy," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note to clients.
Ahead of weekly oil inventory reports from industry and government, US crude stocks were expected to have fallen slightly last week, according to a Reuters survey of analysts on Monday. Gasoline and distillate stockpiles were expected to be higher. Oil investors kept a close eye on the Middle East. Protesters in Sanaa, Yemen, were preparing for a long, messy revolt after President Ali Abdullah Saleh offered no clear path to a hand over when he returned from three months of convalescence resulting an attempt on his life.
In Libya, senior members of the country's ruling National Transitional Council are leaning towards putting on hold plans for a new caretaker government because they cannot agree on a lineup, a source close to the council told Reuters. But as Libyan provisional government forces backed by Nato warplanes attacked the eastern outskirts of Sirte, closing in on Muammar Qadhafi loyalists, there continued to be signals that oil exports could restart soon.
Italy's Eni said it has restarted oil output from 15 wells, and a tanker is loading condensate at the Libyan port of Mellitah with another due to arrive on Tuesday to pick up a cargo that is most likely to be crude oil, the terminal's harbour master told Reuters.
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