Oil prices edged higher on Monday, snapping a string of four lower closes, as a drop to multi-month lows attracted bargain hunters and as the euro rose against the dollar on hopes that Europe's leaders can keep the euro zone intact. Brent and US crude recovered after falling sharply early, coming out of the weekend still feeling pressure after last week's slump on concerns that slowing US and Chinese economies and the euro zone crisis will curb petroleum demand.
The euro strengthened and European equities rose after last week's batch of grim global economic data fuelled hopes that there is a greater likelihood of central-bank policy action to stimulate growth and that European leaders will fashion a plan to ease the region's debt crisis. "Europe's stock market stabilized, and the euro bounced and the dollar weakened, on the hope there will be central bank stimulus to stop the bleeding and that pulled crude off the early lows," said Phil Flynn, analyst at Price Futures Group in Chicago.
Finance ministers and central bank governors of the Group of Seven (G7) industrialised nations will hold a conference call on Tuesday to discuss the European debt crisis. Brent July crude rose 42 cents to settle at $98.85 a barrel, having recovered after dropping as low as $95.63, the lowest intraday price since January 26, 2011. US July crude rose 75 cents to settle at $83.98, after falling early to $81.21, the lowest since prices were last under $80 a barrel on October 6, 2011.
The buying looked timed with weak relative strength index (RSI) readings for Brent, US crude and also US gasoline and heating oil futures. All had 14-day RSI readings well below the 30-day level that is considered a signal of an oversold condition for traders using technical indicators.
Total Brent crude volumes lagged US crude turnover, with a British bank holiday thinning trade. While US volume neared its 30-day average, Brent dealings were 30 percent under the 30-day average. Brent posted a 7.86 percent weekly loss and US crude fell 8.4 percent, the fifth consecutive weekly drops for both. The fading US jobs growth has raised expectations that the Federal Reserve might be more inclined to engage in a third round of stimulus, known as quantitative easing, a move that would be expected to weaken the dollar.
Investors await Federal Reserve Chairman Ben Bernanke's Thursday testimony before a congressional panel for any clues about plans for bolstering a faltering economic recovery. Oil prices have fallen back after Brent rallied above $128 a barrel in March, the highest since 2008, lifted by concerns about supply disruptions as sanctions on Iran tightened and with talks over Tehran's nuclear program suspended as a European Union embargo on Iran's oil was set for July.
The threat to economic growth from high oil prices spurred consumer countries to consider releasing strategic reserves and prompted top exporter Saudi Arabia to raise production in an effort to bring prices back to $100. US crude stockpiles are expected to have slipped last week, a Reuters survey of analysts taken on Monday showed. A drop in stockpiles would snap a string of 10 stock builds reported by the government.
The UN's International Atomic Energy Agency (IAEA) and Iran are set to hold a second round of talks in Vienna on Friday and IAEA Director General Yukiya Amano said he hoped an agreement could be finalised that will allow the IAEA to resume the investigation into Tehran's nuclear program. Iran and the six powers - the United States, France, Russia, China, Germany and Britain - will meet for a third time this year in Moscow on June 18-19 after making little progress on the dispute at their most recent meeting in Baghdad last month.
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