Oil Prices Mixed On > Norway Lockout + Rate Cuts
6th July 2012
Oil prices traded mixed Thursday July 5, 2012 after China and the European Central Bank cut interest rates and Norway announced a lockout of unionized oil workers in a pensions dispute.
New York's main contract, light sweet crude for August, finished at $87.22 a barrel, down 44 cents from Tuesday's closing level. The market was closed Wednesday for a public holiday.
In London trade, Brent North Sea crude for delivery in August added 93 cents to settle at $100.70 a barrel.
Traders interpreted China's unexpected interest rate cuts "as a determination by the country to combat slowing growth. This should therefore feed through to demand for crude from the world's second-largest country by GDP," said GFT analyst David Morrison.
The ECB lowered its key rate to a record low 0.75 percent in a bid to boost fragile growth, but investors appeared disappointed, viewing it a timid response to the eurozone financial crisis.
The dollar, meanwhile, gained ground against the euro after the ECB rate cuts, making dollar-priced oil more expensive for buyers using weaker currencies.
Oil remains "under pressure from a stronger dollar," said VTB Capital analyst Andrey Kryuchenkov.
The Norwegian lockout, announced Thursday amid an almost two-week-old strike, threatens to halt production in Western Europe's largest oil exporter and the world's number-two natural gas supplier.
Norway's state-owned energy company Statoil said the lockout starting Monday would halt production on Norway's continental shelf, where about 50 companies operate including oil majors such as BP and Royal Dutch Shell.
"Given concerns about attracting and retaining investment in the Norwegian oil industry and security of supply considerations, we think a resolution will come sooner, rather than later," said JPMorgan Chase analysts.
Traders shrugged off an unexpectedly strong drop in US crude oil stockpiles, which fell by 4.3 million barrels in the week ended June 29, the Department of Energy's EIA reported.