Forexpros – Crude oil prices declined for the first time in four days on Friday, paring some of the week’s earlier gains as mounting fears Greece was headed towards a messy sovereign debt default prompted investors to shun riskier assets.
On the New York Mercantile Exchange, light sweet crude futures for delivery in March settled at USD99.36 a barrel by close of trade on Friday, climbing 1.68% over the week.
Crude prices rose nearly 2.55% in the three sessions leading up to Friday. Prices spiked higher on Tuesday after Federal Reserve Chairman Ben Bernanke said in a testimony to the Senate Budget Committee in Washington that the recent decline in the U.S. unemployment rate understated weakness in the labor market and that the economic outlook remains “uncertain”.
The comments fuelled speculation that a third round of bond purchases, also known as quantitative easing was still a possibility for the bank.
On Thursday, prices jumped to a seven-day high of USD100.17 a barrel after Greek political leaders had reached a long awaited consensus on the conditions set by international creditors in exchange for a new bailout worth EUR130 billion.
Crude futures found further support after official data showed that U.S. jobless claims fell to an almost four-year low of 358,000 last week. Jobless claims have remained below 400,000, a level historically associated with an improving labor market, in 13 of the past 15 weeks.
But prices took a hit on Friday amid uncertainty over whether Greek lawmakers would approve a vote on austerity measures in order to secure a second bailout package.
Greece’s parliament must approve the proposed spending cuts in a vote slated for Sunday, before the country’s lenders will release the aid package.
Concerns over a chaotic default grew after Greek media reported Friday that a junior member of the country’s three-party ruling coalition refused to back the austerity measures and offered to resign.
Meanwhile, Fitch Ratings reiterated its opinion that Greece will default even if it obtains the bailout funds.
The news prompted investors to shun riskier assets, such as stocks and industrial commodities and flock to traditional safe haven assets like the U.S. dollar and Treasuries.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, gained 0.54% on Friday to settle the week at 79.11.
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.
The International Energy Agency on Friday lowered its global oil demand outlook for a sixth consecutive month, predicting oil consumption will increase by 800,000 barrels a day, compared to a prior forecast of 1.1 million barrels a day, citing lower global growth projections.
“A two-speed outlook prevails – with robust oil demand growth envisaged in the non-Organization for Economic Cooperation and Development countries, while demand continues to fall across most of the OECD,” the IEA said in its monthly oil market report.
The downbeat outlook came a day after the Organization of the Petroleum Exporting Countries cut its forecast for world oil demand growth in 2012 by 120,000 barrels per day to 940,000.
“Worries about the U.S. economy, along with the EU debt problem, are adding more uncertainty to world oil needs over the next 12 months,” the report said.
Crude prices came off their lows after the CME Group, operator of the NYMEX reduced the amount of cash that traders must deposit for speculative positions by 9% to USD6,885. The new rates will be effective after the close of trading Monday, the company said in a statement.
Exchanges require market participants to post margin to cover potential losses in future trading sessions, and to avoid a default by a trader.
Meanwhile, oil traders continued to monitor tensions between Iran and the West after the Islamic Republic renewed threats to shut the Strait of Hormuz in response to the latest sanctions imposed against the country.
Iran is the world’s fourth largest oil producer, pumping nearly 5% of the world’s oil in 2010. The threat of a major supply disruption from the country has helped support oil prices in recent weeks.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery settled at USD117.10 a barrel by close of trade on Friday. The Brent contract added 2.15% over the week, with the spread between the Brent and the crude contracts standing at USD17.74 a barrel.
The spread had widened to more than USD20 per barrel on Tuesday, the highest since October.
Brent prices have outperformed crude in recent sessions amid concerns over a disruption to supplies from African producers, Nigeria and South Sudan, as well as a spell of freezing weather in Europe.
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