Brent steady near $91 on US storm, EU growth plan

Sun Jun 24, 2012 9:25pm EDT

Related Topics

* About 1/4 of U.S. offshore oil, gas output shut ahead of storm

* Key EU leaders back growth plan; more talks this week

* US sanctions on Iranian oil to start this week

By Florence Tan

SINGAPORE, June 25 (Reuters) - Brent held steady near $91 on Monday on support from lower output after the threat of a storm shut nearly a quarter of U.S. offshore crude and gas output and as key euro zone leaders backed a $156 billion plan to revive growth in the debt-laden region.

Oil futures rose nearly $1 after producers shut output in the U.S. Gulf of Mexico, home to about 20 percent of U.S. oil production on the approach of the first named storm this season.

But the price gains quickly eased after U.S. forecasters said Tropical Storm Debby appeared to be heading away from the U.S. offshore oil patch on Sunday.

Brent crude recovered from two consecutive weeks of losses to hit a high of $91.75 a barrel. The contract edged down 2 cents to $90.96 by 0058 GMT.

U.S. crude rose 3 cents to $79.79 after rising to a high of $80.68 a barrel. The front-month contract posted on Friday its biggest weekly loss since the week to June 1.

"If we have a reprieve from the storms it's going to be temporary," Tony Nunan, a risk manager at Mitsubishi Corp said, as onshore oil and gas production in the United States is almost equivalent to its offshore volume after a strong growth in output from shale resources.

The U.S. National Hurricane Center said on Friday a low pressure system just north of the Yucatan Peninsula had about a 70 percent chance of developing into a tropical cyclone over the next 48 hours.

EUROPE SUMMIT

Oil is on track to post its biggest quarterly fall since the financial crisis in 2008 as the euro zone crisis and weak growth in the United States roiled global markets and threatened to derail fuel demand while ample supply from OPEC capped price gains.

"We could be close to a bottom as it is well below OPEC's target," Nunan said.

Europe moved a step towards a pro-growth policy after German Chancellor Angela Merkel agreed on Friday with leaders of France, Italy and Spain on a 130 billion euros package to revive growth, but resisted pressure for common euro zone bonds or a more flexible use of Europe's rescue funds.

Investors are closely watching a crucial European Union leaders summit later this week, bracing for disappointment but keen to put money to work on any signs of a unified and comprehensive plan to tackle the region's 30-month-long debt crisis.

"The success of the summit can probably best be measured by whether it achieves a meaningful and lasting decline in Spain's bond yields," Ric Spooner, chief market analyst at CMC Markets in Sydney, said in a note.

Investors are also watching if Saudi Arabia will reduce output to stem the recent price fall after the Organization of the Petroleum Exporting Countries agreed in mid-June to maintain the 30 million bpd production ceiling.

The ramp-up in OPEC output has cushioned the impact of sanctions from the United States and the European Union on Iranian crude exports, analysts said.

U.S. central bank sanctions will come into effect this week, while the European Union embargo and a related insurance ban starts July 1. These will likely be implemented as planned after talks on Iran's nuclear programme stalled in Moscow.

Iran's oil exports may have fallen as much as 1 million barrels per day (bpd) in June as more customers in Europe and Asia stop or scale back purchases ahead of the sanctions. (Editing by Ed Davies)

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