Oil stable before critical European debt summit

LONDON—World oil prices stabilized Wednesday as dealers awaited the outcome of an EU summit aimed at resolving the debt crisis before embarking on risky trades.

New York’s main contract, light sweet crude for delivery in December, gained 20 cents to $93.38 per barrel.

Brent North Sea crude for December delivery fell 9 cents to $110.83 a barrel in London midday trade.

Investors are focused on Brussels, where European leaders will gather from 1600 GMT for their second summit in three days on the long-running crisis that has dogged global financial markets.

Markets are demanding a watertight deal to dispel fears that the crisis will spark another fierce global recession – which would slash demand for key commodities like crude oil.

“If there is decisive action on the part of leaders, then I think you could see investors’ appetite for risk expand which would be bullish for commodities, although it really does depend on what is agreed,” said analyst Damien Cox at consultancy EnergyQuote JHA in London.

“It remains to be seen whether a deal is agreed that paves the way for a long-term fix or not. If it appears only temporary then any sense of optimism could evaporate,” Cox told AFP.

European Union presidents and prime ministers leaders face intense pressure to deliver on a promise to fix the crisis.

Markets hope that the summit will agree a huge write-off of Greek debt, a recapitalization of Europe’s banks, and expansion of the eurozone bailout fund to prevent contagion in the likes of Italy and Spain.

“It has been quite obvious over the last week that macro-events have been the main driver behind the trends. Which is no surprise considering what is at stake,” said oil market analyst Filip Petersson at Swedish banking group SEB.

“I definitely think that the outcome today will set the direction over the coming weeks, but I do not think that crude oil prices will be held down for long if it is a negative outcome.

“Inventories are low or at least falling, the sweet crude market remains tight and heating season is approaching in the northern hemisphere winter months,” he added.

Also on Wednesday, the US government’s Department of Energy publishes its latest snapshot of crude oil stockpiles.

The report is a key focus for traders because the United States is the world’s biggest oil-consuming nation.