Forexpros – Crude oil futures edged lower on Friday, as optimism over an agreement by European leaders on a package of measures to contain the region’s debt crisis ebbed, while some profit taking also weighed.
On the New York Mercantile Exchange, light sweet crude futures for delivery in December traded at USD93.55 a barrel by close of trade on Friday, rallying 6.75% over the week, the biggest weekly gain since February.
Crude prices dipped on Friday as concerns over the euro zone’s debt crisis re-emerged after ratings agency Fitch said that writedowns on Greek debt would indicate a default and after Italy’s borrowing costs rose to a euro lifetime high, following an auction of government debt.
The negative news prompted some investors to sell their position on profit taking and lock in gains following the previous day’s sharp gains.
Crude prices surged nearly 4% on Thursday as the U.S. dollar weakened broadly after European leaders made a breakthrough in resolving the region’s two-year old debt crisis.
Euro zone policy makers reached an agreement with banks to take a 50% writedown on the face value of their Greek debt, as well as enhancing the powers of the region’s bailout fund and recapitalizing European lenders.
The news saw investors move in to riskier assets, such as commodities and stocks, and shed traditional safe haven assets like the U.S. dollar.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, tumbled 1.79% to trade at 75.27, the lowest level since September 6.
Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.
Crude prices received further support after official data showed that U.S. gross domestic product rose by 2.5% in the third quarter, the fastest rate of increase since the third quarter of 2010.
The reading nearly doubled growth of 1.3% recorded in the preceding quarter. Analysts had expected U.S. gross domestic product to rise 2.4% in the third quarter.
The U.S. is the world’s biggest oil consumer, using approximately 19.1 million barrels a day in 2010, or 21% of global consumption, according to data from British Petroleum.
Crude prices rose to a three-month high on Tuesday as concerns over a slowdown in demand from China eased after a preliminary reading of the HSBC China purchasing managers’ index rose to a five-month high of 51.1 in October.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for December delivery settled at USD110.03 a barrel by close of trade on Friday. The Brent contract edged 0.31% higher over the week, with the spread between the Brent and the crude contracts narrowing to USD16.48 a barrel, a four-month low.
Earlier in October, the gap between the two contracts widened to a record USD27.88 a barrel, but the differential has narrowed in recent sessions as expectations for the return of Libyan crude supplies has weighed on the Brent contract.
In the week ahead, investors will be focusing on the Federal Reserve’s policy-setting meeting on Wednesday for any hints regarding further easing measures. Friday’s U.S. nonfarm payrolls data will also be in focus.
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