Oil Prices Recover as Eurozone Fears Ease


NEW YORK ( TheStreet) -- Oil prices were ticking higher Thursday morning on a weaker dollar driven by a bit more risk-taking across the stock and commodity markets.

West Texas Intermediate (WTI) light sweet crude oil for December delivery was rising $1.11 to $96.85 a barrel, but off its intraday high of $97.90, as markets felt conservatively more upbeat about Europe's ability to control its debt crisis.

Italian yields were coming off crisis-level highs of above 7% amid a reported temporary intervention by the European Central bank to bring down Italy's borrowing costs.

An unexpected fall in U.S. jobless claims for the second week in a row, as reported by the Labor Department, also helped fuel the market's conservative risk taking.

As some risk appetite trickled back in, the U.S. dollar index fell 0.3%.

"The strengthening will last for as long as the dollar trends lower and the equities trend higher," Schork report analyst Hamza Khan cautioned.

"I think we're likely to see continued choppy trading, with crude direction dictated by the general mood in Europe," Matt Smith, commodity analyst at Schneider Electric's Summit Energy, agreed.

Yesterday, the Department of Energy reported a substantial decline in U.S. crude inventories of 1.4 million barrels for the week ended Nov. 4, compared with the expectation of a 700,000 barrel increase.

European Brent crude for January delivery was swinging between positive and negative territory, down 17 cents at $111.19 at the time of this writing, given its greater proximity to the emotional epicenter of the key global economic news flow.

Following yesterday's plunge on soaring Italian bond yields and fears of a default, the markets were taking in relative stride the International Energy Agency's downward revisions on global oil demand growth forecast. The IEA cut its projections for global oil demand this year by 70,000 barrels a day to 89.16 million barrels a day and by 20,000 barrels a day to 90.47 million barrels a day for 2012.

With oil trading as wildly as stocks lately on the emotional state of the markets, Khan's nearer-term price forecast for WTI is between roughly $88.40 and $100.08 a barrel and between $109.46 and $116.85 for Brent.

Armstrong expects some technical resistance for WTI at yesterday's high of $97.84. A breakthrough of this level however, could see levels arrive at $98.75, or even $99.34.

Analysts generally agree that WTI oil futures could shoot up to $100 a barrel in the nearer-term, but are conflicted on prices beyond that. While Armstrong is targeting the recent month high of $100.62, Smith says "it seems a bridge too far to push on through the psychological level of $100 when there is still so much uncertainty relating to Europe."

"Brent seems to struggle when we get close to the previous highs made back in September. Prices will likely continue to ebb and flow but remain ultimately range-bound as we await further clarity from Europe," Smith added.

Energy stocks were trading mixed.

Apache ( APA) was up 0.4% to $100.26; Anadarko Petroleum ( APC) was flat at $77.85; Chesapeake Energy ( CHK) was rising 0.6% to $25.72; Kinder Morgan ( KMI) was up 0.2% to $27.09; Southern Union ( SUG) was higher by 0.2% to $41.77; Chevron ( CVX) was falling 0.4% to $103.88; and Cheniere Energy ( LNG) was advancing 1.4% to $10.66.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.
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