05 November 2012, Sweetcrude, LONDON – UK Brent crude oil rose above $106 per barrel on Monday, but a decision by the the US government allowing foreign tankers to bring fuel to the East Coast to offset shortages caused by Hurricane Sandy pulled crude futures sharply lower.
Front-month Brent futures were trading up 26 cents at $105.94 per barrel early on Monday after rising to $106.19, while US crude climbed 29 cents to $85.15 per barrel.
“What we’re seeing is buying on dips after the selloff on Friday, otherwise the market is generally cautious, waiting for the outcome of the US elections and to see Sandy’s influence on the oil markets and on US stockpile levels,” said Natalie Rampono, commodity strategist at ANZ.
President Barack Obama and Republican challenger Mitt Romney are locked in a close race, as global markets worry about US budget uncertainty, with looming spending cuts and tax hikes threatening to push the economy back into recession.
The uncertainty comes at a time when crude markets are already weighed down by worries of weak demand, especially in key consumers such as Japan, China and the euro zone, with a ramp-up in production by Saudi Arabia adding to pressure.
Adding to concerns, two days after the US elections, China’s ruling Communist party will begin its once-in-a-decade power shift — an unprecedented occasion of power changes in the world’s top two economies.
Demand worries persisted, despite data last week that pointed to a sustained improvement Asia, as analysts remained unconvinced about a recovery in US and China, which are essential for a global turnaround.
Manufacturing in the euro zone shrunk for a 15th straight month, increasing doubts about a global recovery. France, Spain and Italy and Spain saw a continuing trend of sharp decreases in fuel use, but Germany and Britain saw growth, statistics showed last week.