Forexpros – Crude oil futures gave back some of the previous session’s strong gains during European morning hours on Monday, as traders remained jittery amid uncertainty over how and when European leaders can put Friday’s newly agreed measures into practice.
Concerns over a deeper-than-expected slowdown in Chinese economic activity and some profit taking further weighed.
On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD83.89 a barrel during European morning trade, retreating 1.25%.
It earlier fell by as much as 1.5% to trade at a session low of USD83.53 a barrel. Prices hit USD85.30 a barrel on Friday, the highest since June 18.
Oil futures surged 9.4% on Friday, the largest one-day gain since March 2009 after European leaders unexpectedly reached an agreement on measures to help resolve the ongoing debt crisis in the euro zone.
After a two-day summit in Brussels, European Union leaders agreed to use the euro zone’s bailout funds to support struggling banks directly, without adding to national debt and also agreed to set up a joint banking supervisory body for the euro area.
In addition to the direct recapitalization of Spain’s banks, euro zone bailout funds will be able to purchase government debt in order to keep down borrowing costs.
EU leaders also agreed to devote EUR120 billion in stimulus to encourage growth and create jobs.
But market sentiment cooled on Monday, as details about how and when European leaders can put the newly agreed measures into practice still remained uncertain.
Market analysts also warned that questions remain over the long-term effectiveness of the measures, while emphasizing that they do little to address the root causes of the euro zone’s debt crisis.
Market players will be closely watching as EU finance ministers hash out the details of these plans over the next two weeks.
Meanwhile, concerns over a deeper-than-expected slowdown in Chinese economic growth lingered after official data showed that manufacturing in June grew at its slowest pace in seven months, as new export orders tumbled to lows hit in March 2009.
The rival HSBC PMI, which focuses more on small and medium-sized companies, inched up to 48.2 in June from 48.1 in May, indicating contraction for the eighth consecutive month.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand.
A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of the euro zone’s debt crisis.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery shed 1.4% to trade at 96.45 a barrel, with the spread between the Brent and crude contracts standing at USD12.56.
Prices fell to a 17-month low of USD88.49 a barrel on June 22, as an escalating debt crisis in the euro zone and worries over a deeper-than-expected slowdown in Chinese economic activity dragged prices lower.
London-traded Brent prices lost nearly 20% on the quarter, the biggest decline since the final three months of 2008.
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