SINGAPORE – Oil prices hovered above US$85 a barrel Tuesday in Asia, pausing after gains of 13 per cent over the past week that were fueled by hopes Europe will contain its debt crisis and avoid a global recession.
Benchmark crude for November delivery was down 11 cents at $85.30 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $2.43 to settle at $85.41 in New York on Monday.
Brent crude was down 12 cents at $108.83 a barrel on the ICE Futures Exchange in London.
Investor optimism was bolstered after German Chancellor Angela Merkel and French President Nicolas Sarkozy said Sunday they would finalize a “comprehensive response” to Europe’s debt crisis by the end of the month.
Concern that a possible debt default by Greece could lead to a banking crisis had sent crude to a 12-month low of $75 last week. But traders now expect European leaders to agree to pump more capital into the region’s banks, which would likely limit the possible damage of a default.
“A week ago, traders and investors saw Europe melting down,” Cameron Hanover said in a report. “But Germany and France have agreed to contain the Greek contagion. The end-result is that confidence has been restored.”
Oil traders also took their cue from surging stock markets. The Dow Jones industrial average jumped 3 per cent Monday and Asian stock markets gained Tuesday.
In other Nymex trading, heating oil fell 0.5 cent to $2.90 per gallon and gasoline futures added 0.8 cent to $2.70 per gallon. Natural gas gained 3.3 cents to $3.57 per 1,000 cubic feet.
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