Forexpros – Crude oil futures edged lower in choppy, year-end trade on Friday, as lingering concerns over the euro zone’s debt crisis weighed, however losses were limited amid growing fears over a disruption to Iranian oil supplies.
On the New York Mercantile Exchange, light sweet crude futures for delivery in February traded at USD98.89 a barrel by close of trade on Friday, shedding 0.95% over the week.
Crude oil prices rose 8.2% in 2011, the third consecutive annual gain as violence and social unrest spread throughout major oil producing countries in North Africa and the Middle East, sparking fears over a disruption to global supplies.
Prices rallied to a 32-month high of USD114.80 a barrel in May, before dropping to USD74.95 in early October as a deepening euro zone debt crisis and fears over a ‘hard landing’ in China pushed investors to liquidate assets such as industrial commodities.
With most investors away on year-end leave, trading volumes were thin on Friday, resulting in tight liquidity conditions and irregular volatility. The NYMEX floor session will remain closed on Monday for the New Year’s holiday.
Crude prices fell to a one-week low on Thursday after Italy’s Treasury sold just over EUR7 billion of long-term debt maturing between 2014 and 2022, below the maximum target of EUR8.5 billion.
Following the auction, Italian 10-year bond yields remained above the 7% threshold widely viewed as unsustainable in the long term, fuelling fears that the euro zone’s bailout facility would be insufficient if the country is forced to seek financial aid.
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.
Meanwhile, prices remained supported amid concerns over a disruption to Iranian oil exports after the Islamic Republic said it will launch missiles and torpedoes as part of an ongoing naval drill in the Strait of Hormuz.
Iran’s Oil Minister Rostam Ghasemi warned on Saturday that crude prices will rise to more than USD200 a barrel if sanctions are imposed on Iran’s oil exports.
The Strait of Hormuz, located between Iran and Oman, is one of the most important oil-shipping channels in the world, handling about 33% of all ocean-borne traded oil, according to the U.S. Energy Information Administration.
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 February delivery settled at USD107.22 a barrel by close of trade on Friday. The Brent contract fell 0.7% over the week, with the spread between the Brent and the crude contracts standing at USD7.80 a barrel.
Brent prices climbed 13% in 2011. The gap between the two contracts widened to a record high USD28.08 a barrel in early October, before narrowing by nearly 70% as expectations for the return of Libyan crude supplies weighed on the Brent contract.
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