West Texas Intermediate crude advanced to the highest level in almost a month after European policy makers signaled flexibility on the application of an unprecedented bank tax in Cyprus.
Futures rose for a third day as European officials said Cyprus could ease the cost of the bank-savings levy to small depositors. Outrage over the tax threatened to derail a bailout and worsen Europe’s debt crisis. It sent crude down 1.8 percent in intraday trading before the rebound. The Dow Jones Industrial Average trimmed a 100-point loss and the euro reduced a decline against the dollar. Oil also gained after failing to sustain a move below its 100- and 200-day moving averages.
“It’s not the end of the world for Europe,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “People are waiting to see how it plays out. The equity market has come back pretty strong and the dollar is off its highs.”
WTI for April delivery rose 29 cents, or 0.3 percent, to $93.74 a barrel on the New York Mercantile Exchange, the highest settlement since Feb. 20. It fell to $91.76 earlier. Volume was 4.6 percent below the 100-day average for the time of day at 4 p.m.
Brent for May settlement dropped 31 cents, or 0.3 percent, to end the session at $109.51 a barrel on the London-based ICE Futures Europe exchange. Volume was 16 percent below the 100-day average. The European benchmark grade was at a premium of $15.40 to WTI for the same month. That’s down from $16 on March 15 and is the lowest level since January.
“Oil, equities and the dollar are very heavily correlated right now, and oil is just going along with what the equities and what the euro is doing,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “There are no fundamentals for oil per se.”
The Dow average was down 62.05 points at 14,452.06 at 4:03 p.m. in New York after falling as much as 109.90 points. The Standard & Poor’s 500 Index slid 0.6 percent. It was down as much as 1 percent earlier.
The euro weakened 1.1 percent after declining 1.5 percent to as low as $1.2882, the least since Dec. 10 and the biggest decrease since Jan. 13, 2012. A weaker euro reduces dollar-denominated oil’s appeal as an investment alternative.
“We are following equities and currencies,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “The 200-day and 100-day moving averages all set around $92, and there’s been a lot of support there.”
The April WTI contract’s 200-day moving average was at $92.08 today, and the 100-day average was $92.02.
Finance ministers in the euro area reached an agreement on March 16 forcing depositors in Cypriot banks to share in the cost of the latest bailout estimated at 5.8 billion euros ($7.6 billion). A vote on the tax in Cyprus was delayed for a second day until tomorrow.
“It is important that Cyprus and its euro-area partners work to resolve the situation in a way that is responsible and fair and ensures financial stability,” the U.S. Treasury Department said in an e-mailed statement today
Banks in the island nation will remain shut tomorrow and March 20, a government official said, asking not to be identified. Cyprus accounts for less than half a percent of the 17-nation euro economy.
“People realized that Cyprus is a very small part of the EU economy,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The tax is not a done deal yet, and Cyprus just delayed the vote again.”
The European sovereign debt crisis began in Greece three years ago and has reduced economic growth and fuel demand as it spread to Ireland, Portugal, Italy, Spain and Cyprus.
Crude prices will stay at current levels for the “foreseeable future,” Saudi Arabian Oil Minister Ali Al-Naimi said in comments reported by the official Saudi Press Agency today. The kingdom is concerned about global economic growth, not oil prices, he said.
Any suggestion that Saudi Arabia is trying to keep oil prices at certain levels to finance domestic spending is “not realistic,” Al-Naimi said.
Saudi Arabia and Iraq raised crude exports in January for the first time in three months as demand from Asian countries climbed, according to data on the website of the Joint Organizations Data Initiative yesterday.
Oil also pared losses after Oil Minister Abdulbari al-Arusi said Waha Oil Co.’s pipeline in Libya was shut because of a strike at its Gialo field, cutting the country’s crude output by 120,000 barrels a day.
Implied volatility for at-the-money WTI crude options expiring in May was at 17.5 percent at 3:10 p.m. in New York, little changed from 17.3 percent March 15. The figures are down from 24.7 percent on Feb. 21.
Electronic trading volume on the Nymex was 455,419 contracts as of 4 p.m. It totaled 491,903 contracts on March 15, 9.3 percent below the three-month average. Open interest was 1.68 million contracts.