Markets teeter as oil rises again

MORE THAN €2bn was wiped off the value of Irish shares yesterday in another bad trading day.

British stocks also dropped the most in three months, led by Northern Rock, which plunged to a record low.

In the US stocks fell after a brokerage downgrade of Citigroup prompted investors to sell shares of financial services companies on concerns about more credit losses and the housing slump.

Goldman Sachs cut Citigroup to “sell” and said the bank may have to write off $15 billion (€10.2bn) over the next two quarters as mortgage losses reduce earnings.

Meanwhile, oil handed back early gains to stand near $94 a barrel yesterday as investors took profits, but concerns over the dollar’s weakness and uncertainties about OPEC’s moves to boost output continued to provide support.

OPEC’s heads of state summit in Riyadh ended on Sunday without signalling whether the producer group would agree to pump more oil at its December 5 policy meeting in Abu Dhabi.

But of greater interest to investors was the push by Iran and Venezuela — both locked in rows with Washington — for action to offset the falling value of their dollar-denominated oil revenues.

US light crude was 7 cents up at $93.91 by 5pm. It rose more than $1 in earlier trade to $95.15.

“OPEC talk about prices being undervalued and its concerns with the falling dollar are all filtering into the market,” said Mark Pervan of ANZ Bank in Melbourne.

Barclays Capital analysts added that prices were receiving “strong support from underlying tightness, though sentiment appears to be suffering from a slight resurgence of demand pessimism“.

Oil has slid from an all-time high of $98.62 a barrel struck on November 7, as traders fretted about weakening oil demand in the world’s top consumer and US crude stocks unexpectedly rose, although the looming winter has lent fresh support.

Iran’s president Mahmoud Ahmadinejad said the market price of oil was still undervalued.

Reuters