Oil Holds Near Three-Month High as Europe Discusses Debt

Oil in New York was little changed near a three-month high amid concern that Germany’s central bank won’t support a plan to ease the region’s sovereign debt crisis and as the dollar slipped against the euro.

Futures fell for the first time in five days after the Bundesbank stepped up criticism of the European Central Bank’s plan to embark on potentially “unlimited” government bond purchases. The dollar weakened against the euro as Greek Foreign Minister Dimitris Avramopoulos said the country would meet fiscal targets connected to its bailout.

“The market is rather listless,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “There’s not any news that’s going to move the market strongly in either direction.”

Crude oil for September delivery fell 4 cents to settle at $95.97 on the New York Mercantile Exchange. In intraday trading, the contract reached $96.53, the highest level since May 11. September oil expires tomorrow. The more actively traded October contract declined 6 cents to $96.26.

Brent oil for October settlement dropped 1 cent to settle at $113.70 on the London-based ICE Futures Europe exchange.

Jean-Claude Juncker, the Luxembourg premier who heads the group of euro-area finance ministers, is expected in Athens on Aug. 22 to discuss Greek Prime Minister Antonis Samaras’s request for a two-year extension of the country’s fiscal adjustment program. Samaras travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

European Discord

“The Bundesbank statements show that there is still a lot of disagreement about how to deal with the debt crisis in Europe,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It appeared last week that an agreement was near. This is causing people to sell off oil.”

The talks come as the ECB fleshes out plans to curb the turmoil in European bond markets, which would give governments time to revamp their economies. The bank’s governing council may decide in early September to set yield limits on the debt of each country, Der Spiegel reported yesterday, without saying where it got the information.

Europe’s shared currency climbed against the dollar after Avramopoulos said his government will present budget cuts that show Greece will meet the fiscal targets linked to its bailout. The euro gained 0.1 percent to $1.2346. A stronger euro and weaker U.S. currency increase the appeal of dollar-denominated raw materials as an investment.

Premium Widens

The European benchmark grade’s premium to West Texas Intermediate crude traded in New York rose 5 cents to $17.44.

The European oil may stay more expensive than WTI in coming months because of field maintenance in the North Sea. Shipments of the four crude streams that make up Dated Brent will tumble next month, loading programs obtained by Bloomberg indicate, amid a scheduled overhaul at the Buzzard oilfield.

“The heavy maintenance season in the North Sea explains the relative strength of Brent,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Otherwise we are just waiting on further signs of what the economy will do.”

Oil rose in early trading as United Nations monitors prepared to leave Syria after the failure of their four-month mission, while the organization’s newly appointed envoy described the country’s conflict as a civil war. The departure of the UN military monitors marks the end of the organization’s hopes that a cease-fire between the government of Bashar al-Assad and its armed opponents might be close.

Middle East

“Energy markets are moving on just about everything except oil news right now,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “Worries about the Middle East have been boosting prices but there were no major headlines over the weekend.”

Saudi Arabia’s output increased 3 percent to 10.1 million barrels a day in June from May, according to data submitted by the government to the Organization of Petroleum Exporting Countries and posted on the Joint Organization Data Initiative website yesterday. The Middle East nation overtook Russia, which pumped 9.9 million barrels, as the world’s largest oil producer during the month, the data showed.

Net-long positions in oil held by money managers, including hedge funds, commodity pools and commodity trading advisers, retreated by 11,764, or 7.2 percent, to 152,222 futures and options combined in the seven days ended Aug. 14, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 17.

Electronic trading volume on the Nymex was 395,793 contracts as of 3:41 p.m. in New York, the lowest total this month. Volume totaled 489,470 contracts Aug. 17, 11 percent below the three-month average. Open interest was 1.49 million.

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