Forexpros – Crude oil futures swung between small gains and losses on Wednesday, as investors monitored developments surrounding the euro zone’s ongoing debt crisis as well as lingering tensions between Iran and the West.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at USD100.95 a barrel during European morning trade, easing up 0.07%.
The March contract traded between a range of USD100.70 a barrel, the daily low and a session high of USD101.58.
Market sentiment came under pressure after ratings agency Fitch’s warned earlier that Italy could face a two-notch downgrade.
The ratings firm, which currently holds Italy at an A+ rating, said last week that there was a “significant” chance that Italy will have its credit rating cut by the end of January.
Adding to worries, overnight deposits at the European Central Bank rose to yet another record high, surpassing EUR500 billion for the second consecutive day, underscoring the unwillingness of European lenders to lend to each other.
Meanwhile, Greece’s government was due to resume talks with its bond holders to discuss a voluntary write-down on Greece’s sovereign debt, after talks broke down on Friday, amid disagreements over how much money investors will lose by swapping their bonds.
Markets were also eyeing a government debt sale from Portugal, in what was being viewed as a critical test of investor’s appetite for the country’s debt.
Euro zone developments have dominated trading in the oil market for the last several months, amid worries that the sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
Prices continued to draw support from concerns over potential disruptions to Iranian oil exports after the Islamic Republic warned Saudi Arabia against delivering additional oil to world markets to compensate for a drop in Iranian oil exports if they are hit by sanctions.
The comments came a day after Saudi Arabia’s oil minister pledged to boost the kingdom’s production by as much as 2.7 million barrels a day, more than Iran exports, if there was market demand for more oil.
European Union foreign ministers are scheduled to meet January 23 to decide on proposed sanctions on Iran’s oil imports.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery added 0.15% to trade at USD111.71 a barrel, with the spread between the Brent and crude contracts standing at USD10.76 a barrel.
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