IPE Brent crude gains ground, hovers around $70/barrel

London (Platts)--19May2006

IPE Brent crude futures rose slightly early Friday hovering around the
$70/barrel mark, slowing the volatility seen throughout the week where
intra-day ranges have been above one dollar since Monday, traders said.
At 1112 London time, the July IPE Brent futures contract was traded at
$70.08/barrel, up 41cts from Thursday's close, after having opened in early
electronic trading at $70.13/barrel.
"The financial and commodity markets seem to be linked more so than usual
and this morning the FTSE 100 is mostly unchanged from yesterday and with this
crude is holding," a London-based broker said.
The UK's main share index, the FTSE 100, has fallen over 250 points since
the start of the week to be near 5600 points Friday morning. Brent crude
futures since Monday May 15 have fallen by up to as much as $4/barrel, but on
Friday were around $2.50/barrel down from the start of the week.
"We're also seeing funds entering the markets with commodity bundles.
That is to say they're looking at precious metals with crudes and injecting
cash into more than one commodity," a trader said.
Later Friday, market players do not expect a big increase in trading
activity, ahead of the weekend. However, they have noted that most volatility
in crude futures recently has been late in the European trading day due to US
hedge fund interest and activity in the markets.
Geopolitical tensions in Iran and Nigeria have taken a back seat this
week to concerns that high oil prices are crimping the global economy,
according to market players.
"The crude market still appears willing to accept guidance from the
gasoline for the time being as geopolitical concerns have been pushed to the
back burner for now," Prudential Financial said in a report.
The main fundamental market mover was the US stock data released on
Wednesday, with builds in gasoline of 1.3-million barrels according to the
Energy Information Agency. Crude futures fell on the back of the build despite
the build being in line with analyst's projections. However, some analysts
thought the sell-off was overdone.
"We are also less convinced than the oil markets of the bearish tone of
the latest weekly oil data," a Barclays report said. "The build [in gasoline
inventories] was just in line with its normal seasonal pattern and...high
import levels...along with robust demand figures, concerns over gasoline
supplies have been heightened by the transition to ethanol as a gasoline
additive," the report said.

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