World Bulletin/News Desk
Oil surged on Friday in heavy trading to the fourth biggest daily gain on record, as a deal by European leaders to shore up euro zone banks triggered frantic short-covering by funds that had been riding crude's price collapse over the last quarter.
Despite the day's sharp gains, both international benchmark Brent and U.S. oil futures posted their biggest quarterly declines since the fourth quarter of 2008.
On the day Brent crude oil futures rose more than $6 a barrel to near $98 while U.S. crude jumped by more than $7 to settle just below $85 a barrel -- the fourth largest daily gains in dollar terms since the contracts were launched.
Oil rallied along with the euro and world stocks after euro zone leaders agreed on measures to cut soaring borrowing costs in Italy and Spain and recapitalize regional banks. Crude drew further support from a strike in Norway that cut production of oil and natural gas liquids by 230,000 to 250,000 barrels per day, or up to 13 percent of the capacity of the world's No. 8 crude exporter.
"The NYMEX just went wild. It never looked back. Just up, up and away." said John Troland, an independent energy advisor in Houston, referring to the New York Mercantile Exchange where benchmark U.S. crude oil futures trade.
Throughout the second quarter, hedge funds and other speculators had bet big on lower oil prices. Speculators cut their net long positions by more than half over the quarter, according to data from the U.S. Commodity Futures Trading Commission.
In addition to mounting worries euro zone, oil prices came under pressure in recent months from weaker demand and swelling global inventories as Saudi Arabia boosted output to quell concern about the drop in exports from sanction-hit Iran.
"We had significant second-quarter trends that may all be in the process of reversing, including the risk off trade triggered by the EU instability," said Tim Evans, energy analyst for Citi Futures Perspective, adding oil demand is normally seasonally stronger in the second half of the year.
"What has changed today is the market sentiment, the fundamentals may evolve at a more glacial pace."
Brent crude oil rose $6.44 to settle at $97.80 a barrel, a gain of 7.05 percent and the biggest one day rise since April 2009. Brent started the second-quarter at $122 a barrel.
U.S. crude rose $7.27 to settle at $84.96 a barrel, a gain of 9.36 percent - the biggest since March 2009. U.S. crude started the second-quarter at $103 a barrel.
Brent volume was almost 16 percent above the 30-day average, while U.S. crude futures saw turnover 29 percent above the 30-day average.
Front-month U.S. July RBOB gasoline rallied 4.3 percent while heating oil surged 5.7 percent. Both contracts expired on Friday.
Analysts said Friday's move could portend better fundamentals for oil for the rest of the year as sanctions against Iran cut the OPEC member's output.
"Given it's the last day of the quarter we might be seeing some rebalancing and short-covering (by funds) after the falls we've seen," said Katherine Spector, commodity strategist at the Canadian Imperial Bank of Commerce in New York.
"The supply-and-demand balance looks better for the second half of this year, so we expect to see prices move higher from here. We think there will be further reductions in Iran's exports and at the same time other OPEC members are likely to reign in production slightly."
OPEC's oil output has remained close to its highest since 2008 in June as extra oil from Saudi Arabia and Iraq has compensated for a drop in Iranian supply to its lowest level in more than two decades, a Reuters survey found on Friday.
Saudi Arabia, OPEC's largest producer, has increased its output to 10.1 million bpd to help make up for the shortfall from Iran.
Former finance minister says Russian sovereignity doesn't preclude economic, trade and financial relations with Europe and the US.
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Austrian Chancellor Werner Faymann justified the original sanctions as "a self-defence step", but added: "Our goal cannot be tightening the sanctions."
Both the European Union and United States adopted tighter restrictions on investments in Crimea this week, targeting individuals, Russian Black Sea oil and gas exploration and tourism.
Chinese Premier Li Keqiang said the offer included $1 billion for infrastructure, $490 million for poverty alleviation and $1.6 billion in special loans for China's production capacity export
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Norwegian energy company Statoil, which suspended 5 rigs in the last 2 months, granted $610 million for development of its gas fields
Putin earlier announced pipeline project via Bulgaria would be cancelled.
President Vladimir Putin said that Russia needed to take the opportunity to diversify its economy to protect it from external shocks.
Verdi said in a statement that workers at four of those centres had decided to continue their strike until Saturday and employees at the Graben warehouse would strike until Dec. 24.