Oil smashes through $71 on economic optimism

Crude broke through $71 a barrel on continued optimism for a sharp upswing in world economic activity and a further rebel attacks on the petroleum industry in Nigeria.

Expectations for crude benefiting from a recovery were bolstered by gains across various asset classes, including a strong performance overnight for Wall Street shares.

 
A falling dollar and rising investor risk appetite also helped boost demand for crude with oil, which is denominated in dollars, becoming cheaper for those operating in other currencies.

 
Elsewhere, the Movement for the Emancipation of the Niger Delta, the most active militant group targeting the Nigerian oil infrastructure, said it had bombed a wellhead in a Royal Dutch Shell oilfield – the latest in a spate of attacks over the last two weeks.

 
While attacks on oil fields and pipelines in the Niger Delta have occurred regularly over the past three years, the timing and intensity of recent rebel action has slightly surprised the market.

 
“Even rising political risk to Iranian, Nigerian and Venezuelan supply seems unlikely to supplant the economy and the dollar as oil price driver,” said Antoine Halff, deputy head of research of Newedge.

 
“The apparent stalling of the crude price rebound since early June has less to do with the failure of oil fundamentals to validate the sighting of economic ‘green shoots’ than with renewed concerns about the pace and scope of economic recovery”.

 
Nymex August West Intermediate, the US benchmark blend, rose 74 cents to $70.97, while ICE August Brent, the European oil standard, rose 77 cents to $70.55.

 
Elsewhere base metals struggled for direction as copper edged up 0.2 per cent to $5113 per tonne, while aluminium was flat at $1679 per tonne.

 
“The base metals have failed to break out of recent ranges and we suspect that sideways price action will continue until there is a clear direction signal from the fundamentals,” said Gayle Berry of Barclays Capital.

 
“At the moment there is a lot of speculation that Chinese import buying will slow, but so far there is little evidence of this. In copper, the signs are perhaps most mixed with price spreads and anecdotal reports telling two very different stories. Over the past few days there has been growing market speculation over the possible re-exporting of copper from China”.

 
Spot gold benefited form the limp dollar, rising 0.7 per cent to $944.50 a troy ounce.