Oil prices slip as Cyprus uncertainty continues

AP News
Posted: Mar 21, 2013 8:34 AM

The price of oil fell slightly Thursday, to near $93 a barrel, as traders awaited a solution to a financial crisis in Cyprus that has raised fears of a destabilizing exit of the country from the euro.

By early afternoon in Europe, benchmark oil for May delivery was down 34 cents to $93.16 a barrel in electronic trading on the New York Mercantile Exchange.

On Wednesday, statements from U.S. Federal Reserve Chairman Ben Bernanke reaffirming the central bank's commitment to continue with its monetary stimulus helped the Nymex April contract, which has since expired, gain 80 cents to settle at $92.96 a barrel.

European jitters have escalated since the government in Cyprus rejected a bailout plan Tuesday that would have taxed bank deposits. The Mediterranean nation has four days to come up with a new plan to raise 5.8 billion euros ($7.5 billion) on its own in order to secure 10 billion euros in rescue loans from international creditors.

Without a bailout deal, Cyprus' banks would collapse, devastating the country's economy and potentially forcing it to exit the euro currency.

"It's hard to think that the island tourist country of Cyprus could really drag the Bulls down," said Carl Larry, president of Oil Outlooks and Opinions in a commentary. "It's the farthest from any kind of sustainable industry outside of tourism and they depend solely on interest earned from their banking system."

Fresh figures in China and Europe from their respective purchasing managers' index — a yardstick of economic activity — showed that while the economy in China "remains in a moderate acceleration phase" according to analysts at Danske Bank, the eurozone's economy will probably remain in recession during the first three months of the year.

Over the past years, China has been one of the key drivers of the rising demand for crude, outweighing often stagnant or falling demand in the U.S. and Europe.

Brent crude, used to price many kinds of oil imported by U.S. refineries, was down 52 cents to $108.20 a barrel on the ICE Futures exchange in London.

On Wednesday, the Energy Department said the nation's crude oil supplies declined last week by 1.3 million barrels, or 0.3 percent, to 382.7 million barrels, which is 10.5 percent above year-ago levels. It was the first drop in nine weeks and analysts had been expecting supplies to increase.

In other energy futures trading on the Nymex:

— Wholesale gasoline fell 0.98 cent to $3.0922 a gallon.

— Heating oil dropped 0.78 cent to $2.9875 a gallon.

— Natural gas added 0.7 cent to $3.967 per 1,000 cubic feet.


Pamela Sampson in Bangkok contributed to this report.