Brent crude held above $107 (€82.94) a barrel this morning, but was still on track for a second straight week of losses, as Cyprus scrambled to raise money to avert a financial meltdown that could disrupt the euro zone's recovery and diminish its oil demand.
Investors were on edge this week after Cyprus rejected imposing a levy on bank deposits to secure an international bailout, reviving fears of a debt crisis contagion in the euro zone. The European Union has given Cyprus until Monday to raise the money or risk exiting the currency bloc.
Brent crude for May delivery edged down 7 cents to $107.40 a barrel in early morning trade, and looked set to post a fall of more than 2 per cent this week.
US crude for May was at $92.50, up 5 cents, on track to post its first weekly fall in three.
"Brent is obviously under greater pressure because it's closer to the epicentre of the issue," said Barratt's Bulletin chief executive Jonathan Barratt, adding that Europe's oil demand would be conditional on the outcome of the Cyprus issue.
Cypriot finance minister Michael Sarris has failed to win support in two days of crisis talks with Russia on prolonging a bailout loan or on a possible new financing package.
Adding to the uncertainty in Europe as the region's economic downturn deepened in March before the Cyprus crisis intensified.
Concerns in the euro zone, improved North Sea crude supply and an easing of the oil glut at Cushing, Oklahoma, have helped pull Brent's premium to US crude futures below $15 a barrel, its narrowest in more than two months.
More cargoes of North Sea Forties crude are likely to have their loading dates brought forward due to strong output, trade sources said yesterday, boosting supply of the oil that sets the global Brent benchmark.
In the United States, crude stocks at Cushing fell 286,000 barrels last week while economic indicators such as jobless claims and housing data pointed again to a steady recovery.
At the same time, geopolitics continued to underpin the oil markets and limited losses.
Russia said yesterday that Iran and six global powers made progress in expert-level talks this week to ease the standoff over Tehran's nuclear program, but noted there was no breakthrough and said the risk remained that the talks could unravel.
Worries the standoff between the West and Iran will escalate and disrupt oil supplies have kept Brent above $100 a barrel through most of 2012 and this year, despite weak demand.
Reuters
