NEW YORK (Reuters) – Oil prices inched lower on Monday, but settled well above lows reached after European election results revived worries about the euro zone debt crisis, reinforcing anxiety about anemic economic growth and petroleum demand fueled by last week’s U.S. employment data showing slower job creation.
Crude futures posted losses for a fourth straight session as a Socialist victor in France’s presidential election and Greece‘s fragmented result raised doubts about the region’s ability to proceed with austerity measures seen as crucial to addressing soaring debt and a contracting economy.
Trading was choppy and Brent and U.S. crude managed recoveries from multimonth lows hit early that attracted bargain hunters. The euro and U.S. equities also rallied off lows as the shock of the election results wore off.
“It finally dawned on everyone that a socialist leading France is not the same thing as, say, a socialist leading America,” said John Kilduff, partner at Again Capital LLC.
“The policies will not be that different and, in fact, the commodity markets will get some support from the lurch toward stimulus and away from strict financial repression.”
Brent June crude dipped 2 cents to settle at $113.16 a barrel. It earlier slumped to $110.34, the lowest intraday price since January 30 and marking a 14 percent retreat from the 2012 peak of $128.40 hit in March.
Brent continued to seesaw near flat, managing modest turns higher in post-settlement trading.
Brent’s 5.5-percent stumble last week was the biggest percentage weekly loss since the week to November 18, leaving prices below 100-day, 200-day and 300-day moving averages.
U.S. June crude fell 55 cents to settle at $97.94 a barrel, having recovered from $95.34, the lowest intraday price since December 20. U.S. crude tumbled 6.1 percent last week, posting the biggest weekly loss since late September.
The Brent/U.S. crude spread widened, but in choppy trading, sending Brent’s premium to its U.S. counterpart to $15.22 a barrel based on settlements.
With a UK bank holiday thinning trade, total U.S. crude trading volumes outpaced Brent dealings and Brent turnover lagged the 30-day average.
The relative strength index (RSI) for Brent sat at 28 and at 32 for U.S. crude. An RSI below 30 signals an oversold condition to investors watching technical indicators.
The euro initially dropped broadly on the renewed worries about the stability of the euro zone, strengthening the dollar index, before the single currency bounced on technical support and bargain buying.
Europe’s latest bout of turmoil was judged not to be an immediate threat to the economies of China and India, the key sources of oil demand growth, after the initial shock of the French and Greek election results wore off, analysts and broker said.
After stock futures fell sharply, reacting to Europe’s election results, investors shrugged off a weak opening and U.S. equities managed a push higher, as did key industrial feedstock copper, which rallied from a two-week low.
FRANCE, GREECE POST-ELECTION
Socialist Francois Hollande’s victory in France’s presidential election signaled a push back against German-led austerity policies.
Greece‘s election created uncertainty over whether formation of a new government is possible and a first attempt failed on Monday.
Both the conservative New Democracy and Socialist PASOK were thrashed as Greeks voted against the two traditional ruling parties after they imposed austerity in exchange for a bailout to avert a sovereign default. The two parties must woo support from parties boosted in the election by opposing the bailout.
Greece might run out of cash by end of June if it does not have a government in place to negotiate a next aid tranche and projected state revenues fall short, three Greek finance ministry officials told Reuters.
The European Union (EU) executive said Greece must implement the reforms it agreed to under the second bailout program and that the European Commission is ready to help.
(Additional reporting by Zaida Espana in London and Francis Kan in Singapore; Editing by Marguerita Choy)