Oil hovers above $98 amid Europe debt concerns

November 29, 2011 - 11:25 AM

Oil prices hovered above $98 a barrel Tuesday as European leaders raced to contain the continent's debt crisis and keep the euro currency bloc intact.

By early afternoon in Europe, benchmark crude for January delivery was up 13 cents to $98.34 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.44 to settle at $98.21 on Monday.

In London, Brent crude was up 92 cents at $109.92 on the ICE futures exchange.

Crude has zigzagged near $100 for the past two weeks as traders speculate whether Europe's debt crisis will break apart the 17-nation euro currency zone. European leaders are scrambling to keep contagion from spreading, and the more creditworthy nations such as Germany are considering large bond buys from the most indebted countries, such as Greece and Italy.

"The on-again, off-again resolutions to the debt situation in the U.S. and Europe, in relation to oil prices, are dizzying," energy consultant and trader The Schork Group said in a report. "For the time being in the oil market, fundamentally driven headlines matter less and faux promises from American and European technocrats matter more."

Markets were encouraged by Italy's successful auctions on Tuesday, when the eurozone's third-largest economy was able to sell euro7.49 billion ($10 billion) in bonds — albeit at much higher borrowing rates than earlier. This helped the euro make gains on the U.S. dollar, which supported oil prices. A weaker dollar makes crude cheaper for investors trading in other currencies.

The euro was up to $1.3353 from $1.3306 late Monday in New York, while the dollar fell to 77.76 yen from 77.99 yen.

Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products.

Data for the week ending Nov. 25 is expected to show a builds of 1 million barrels in crude oil stocks and of 1.5 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.

Crude jumped above $100 before settling lower Monday on news U.S. shoppers spent nearly $1 billion more on Black Friday — the day after Thanksgiving and the traditional start of the Christmas shopping season — than they did a year ago.

In other Nymex trading, natural gas added 2.6 cents to $3.551 per 1,000 cubic feet. Heating oil rose 2.73 cents to $3.01 a gallon and gasoline gained 1.91 cents to $2.5368 a gallon.

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Alex Kennedy in Singapore contributed to this report.