Crude gains on rebuilding hopes that Spain will seek bailout
Published Oct 16, 2012 08:29PM ET
On the New York Mercantile Exchange, light, sweet crude futures for delivery in December traded at USD92.86 a barrel on Wednesday, up 0.35%, off from a session high of USD92.92 and up from an earlier session low of USD92.81.
Optimism for a Spanish bailout sparked demand for crude, a growth-sensitive commodity.
Reports that two senior German lawmakers indicated that they would support a Spanish application for a ‘precautionary credit line’ from the European Stability Mechanism, the eurozone's permanent bailout fund, sent the oil gaining amid a risk-on session.
Spain has yet to request a bailout from its neighbors, which has weakened commodities in recent sessions, though the government is reportedly mulling requesting a credit line from the ESM, which would allow the European Central Bank to buy Spanish sovereign debt and lower borrowing costs.
A bailout would be seen as a step toward growth for the eurozone, which would be bullish for oil.
Elsewhere, Moody's Investors Service confirmed Spain's Baa3 government bond rating as well as the country's short-term rating at (P)Prime-3, which sparked more demand for risk as well as did inflation data out of the U.S.
The U.S. Labor Department reported earlier that its month-on-month consumer price index rose by 0.6% in September, above expectations for a 0.5% gain basically due to higher gasoline prices.
Consumer prices rose at an annualized rate of 2.0% last month, compared to expectations for a 1.9% increase and up from 1.7% in August.
Core inflation rates, stripped of volatile food and energy prices, revealed the prices remain stable in the U.S.
Core inflation rates rose 2.0% on year, in line with expectations and up from 1.9% in August.
Month-on-month core inflation rates dropped 0.1% in September.
Production snags in North Sea oilfields coupled with expectations that U.S. stockpiles are rising continued to keep a wide gap between U.S. and European blends of crude.
On the ICE Futures Exchange, Brent oil futures for December delivery were up 0.11% and trading at USD113.92 a barrel, up USD21.06 from its U.S. counterpart.
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Written By: Investing.com
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