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Oil hovers near $90 in Europe amid expectations of central bank action to support markets
The price of oil hovered near $90 a barrel on Monday, holding onto most of the previous week's gains, as expectations remain elevated that the European Central Bank would act to prevent Spain's financial woes from deepening.
By early afternoon in Europe, benchmark crude for September delivery was down 18 cents at $89.95 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 74 cents on Friday to finish at $90.13 per barrel in New York.
In London, Brent crude was down 65 cents at $105.82 on the ICE Futures exchange.
Oil has climbed after last week's vow from European Central Bank chief Mario Draghi to do whatever it takes to keep the euro common currency intact. Similar remarks from the leaders of France and Germany have created a chorus of support for the beleaguered euro, which was facing a new challenge to its existence as a surge in Spain's borrowing costs raised the prospect that one of Europe's biggest economies could ask for a bailout.
U.S. Treasury Secretary Timothy Geithner meets Monday with Draghi and Germany's finance minister to discuss the huge challenges facing Europe and the global economy. They are expected to issue a statement after their meeting which comes amid high expectations that both the ECB and the U.S. Federal Reserve will soon announce new steps to salvage economic growth.
"The increase in the price of crude is being accompanied by buying on the part of speculative financial investors," said a report from Commerzbank in Frankfurt. "Whether the optimism shown by money managers is justified or not will depend entirely on whether the Fed, the ECB and the Bank of England live up to the high expectations this week and further open the financial floodgates ĚĚĚ or at least indicate that this is a real possibility."
"Until the central bank meetings on Wednesday and Thursday, oil prices should remain well supported, though we believe there is potential for disappointment afterward," Commerzbank said.
China, meanwhile, has been stepping up efforts to counter its economic slowdown, allowing cities to announce big infrastructure spending plans that would boost construction and also have the side effect of increasing demand for oil and other fuels.
In other Nymex energy trading, gasoline was up 0.11 cent at $2.7978 a gallon and heating oil was down 0.89 cent at $2.8816 a gallon. Natural gas rose 6.9 cents to $3.084 per 1,000 cubic feet.