IPE Brent finds support at $70/bbl as it recovers from sell-off

IPE Brent finds support at $70/bbl as it recovers from sell-off

London (Platts)--5May2006

IPE Brent futures in London recovered slightly on Friday from the
$5/barrel sell-off in the previous two sessions, rising ahead of the weekend
with market players expecting to see a small rally despite there being no
fresh news.

The fall of over 6% in June IPE Brent crude started Wednesday as the
market reacted to the surprising build in US crude and gasoline stocks.
At 1031 London time (0931 GMT) June Brent was changing hands at
$70.48/barrel, up 19 cents from Thursday. On Thursday Brent fell below the key
support level of $70 to trade at a three-week low of $69.79/barrel.

"We're seeing a small recovery from the two day sell-off during quiet
trading this morning ahead of the weekend," one broker said. "Technically
people are worried as it is quite a fragile market."

Market players are expecting to see a rally later Friday, ahead of the
weekend, as is now typical as traders cover their positions.
"June Brent may make it up to $71/barrel during the day but I think it
will have difficulty following on with no fresh news propping it up." a trader
said.
The situations in Iran and Nigeria continue to hang over the market,
keeping traders on their toes, market players said. On Friday morning
President Mahmoud Ahmadinejad said Iran would not give up its nuclear program
until it has achieved "industrial scale" production of atomic fuel, according
to the text of a speech he made to regional leaders in Azerbaijan.

Traders still view gasoline as the market leader and expect crude to
follow the direction set by the NYMEX unleaded futures contract. "All eyes are
on gasoline," a broker said.

In related news, the recent high oil prices may shave off at least 0.6
percentage points from Asia's overall economic growth, the chief economist of
the Asian Development Bank told AFP.

"There are two aspects to the oil price increase. One is the magnitude of
the increase and the second is the duration," Ifzal Ali said, noting that if
the increase lasts for a year, growth in the gross domestic product will slow.
"If you have an oil price increase of about 10 dollars, from 60 dollars
to 70 dollars, developing Asia's GDP growth rate will be shaved off by about
0.6 percentage points," Ali said on the sidelines of the ADB's 39th annual
general meeting being held in southern India.

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