Brent climbs above $111 after Greek debt deal
* New Greek debt target greeted with cautious optimism
* Uncertainty over U.S. budget negotiations weighs
* Coming Up: API weekly crude stocks; 2130 GMT
By Luke Pachymuthu
SINGAPORE, Nov 27 (Reuters) - Brent crude rose above $111 per barrel on Tuesday as optimism coursed through financial markets after Greece's international lenders reached a deal on a new debt target, although worries about a looming U.S. fiscal crisis kept a lid on gains.
The euro hit a one-month high and Asian shares climbed for a seventh straight day after euro zone finance ministers and the International Monetary Fund agreed on a package of measures to reduce Greek debt needed to release another tranche of loans to the near-bankrupt economy.
Brent crude was up 13 cents at $111.05 a barrel by 0301 GMT and U.S. crude gained 24 cents to $87.98, following losses on Monday.
Oil prices were also supported by a softer dollar, which makes commodities priced in the greenback cheaper for holders of other currencies.
But traders cautioned that oil price gains may be checked as the longer-term outlook for Europe remained uncertain.
"Markets for now are pricing in that Greece will be refunded, but there are structural problems about the euro zone that needs fixing," said Ben Taylor, sales trader at CMC Markets in Sydney.
"It's amazing how (Europe) keeps finding ways to buy themselves more time. They've simply kicked the can down the road for the moment."
Market attention is now expected to focus on the fiscal policy standoff in the United States. A lack of progress on that front will muddy the outlook for demand from the United States, the world's top oil consumer.
Republicans in the U.S. Congress on Monday called on President Barack Obama to detail long-term spending cuts to help solve the country's fiscal crisis, while holding firm against the income tax rate increases for the wealthy that Democrats seek.
While Congress returned from its Thanksgiving holiday break amid increasing talk about long-term tax reform plans and a need to compromise, the two parties showed no signs yet of having found a way around the short-term tax obstacle necessary to head off the fiscal cliff on Dec. 31.
"If we do hit the fiscal cliff, the U.S. will dip back into a recession which is not good for anyone," Taylor said.
The fiscal cliff's approximately $600 billion in tax hikes and spending cuts that would begin in 2013 would push the U.S. economy back into recession, according to the non-partisan Congressional Budget Office.
"We do see markets, at least for now still pricing in some kind of agreement to take place before the end of the year, but we're going to have to see compromise from both parties."
The oil market is also keeping an eye on the political crisis in Egypt that has triggered worries about supply.
President Mohamed Mursi provoked outrage last week that led to violent protests when he issued a decree that put beyond judicial review any decision he takes until a new parliament is elected, drawing charges he had given himself the powers of a modern-day pharaoh.
Egypt's ruling Islamists tried to defuse the political crisis on Monday, with Mursi backing a compromise over his seizure of extended powers and his Muslim Brotherhood calling off a planned demonstration.
But opponents plan to go ahead with a big demonstration on Tuesday to demand he scrap the decree, threatening more turmoil for a nation that has been stumbling towards democracy for almost two years since president Hosni Mubarak was ousted.
News that OPEC member Nigeria is expected to see oil exports drop to 1.98 million barrels per day in January from a planned 2.12 million bpd in December also supported crude.
Traders are now waiting for weekly U.S. inventory data due out on Tuesday and Wednesday. Analysts forecast a build in crude and refined product stockpiles for the week to Nov. 23. (Editing by Himani Sarkar)
- Tweet this
- Share this
- Digg this
- U.S. strikes have slowed Iraq militants but not weakened them - Pentagon
- Japan, India vow to boost strategic ties during summit
- Federer marches on as wild weather, upsets hit U.S. Open
- Government urges court to leave some coal blocks with companies
- Dozens arrested at Made in America music festival in Los Angeles
The Nifty surged past the psychologically important 8,000 level for the first time to mark its latest record high as blue-chips such as Larsen & Toubro gained after better than expected quarterly economic growth data. Read
Government urges Supreme Court to not cancel some 'illegal' coal mines Full Article