Brent oil price may test $90 this week on Greece debt deal

3 May 2010 3 May 2010

BonTrade

Brent oil prices could well test the $90 mark this week as investor confidence was lifted after a massive 110 billion euro bailout package for debt ridden Greece was approved by the EU over the weekend.

Brent crude oil futures for June delivery was up 13 cents to $87.57 a barrel on the ICE Futures Exchange in early trading on Monday in Asia.

Euro finance ministers on Sunday endorsed the unprecedented bailout to save Greece from impending bankruptcy and shore up the euro after Athens agreed to a further round of spending cuts.

Meanwhile, The European Central Bank says it is suspending its rating limits on Greek debt until further notice. In a statement issued early today, the central bank for the 16 countries that use the euro said the suspension of the minimum credit rating includes all existing and new debt instruments “issued or guaranteed by the Greek government.”

The decision by the bank based in Frankfurt ensures that Greek debt can be used as collateral in ECB lending operations despite its credit ratings.

“The rescue package announced during the weekend may protect Greece but does not remove the restructuring risk and speculation is likely to turn to other fiscally challenged European sovereigns,” said Dariusz Kowalczyk, chief investment strategist at SJ Seymour Group in Hong Kong.

“This means that we have not yet seen the worst of Europe’s fiscal woes.”