Brent oil trading back over $106 after gloom hits markets and crude prices

Brent crude oil futures open today’s trading session back over $106 a barrel as oil prices and a broad range of commodities sunk in trading on Wednesday, in line with gloomy stock markets and a weaker euro which is again helping the US dollar strengthen.

Latest Brent Oil Price

In London, Brent crude oil futures for January 2012 delivery was trading at $106.16 a barrel, 07.50 GMT this morning on the ICE Futures Exchange. The January 2012 oil contract expires today.

The European oil contract closed Wednesday’s trading session at $104.77 a barrel, or 4.3 percent lower on the day.

Gloom Surrounding Europe

Europe is expected to fall back into recession next year, with traders and investors fearing that the European banking system could collapse if EU nations don’t find a way to reduce their debts soon. A key indicator of Europe’s debt problems, the euro, fell to its lowest level against the US dollar in 11 months yesterday.

Meanwhile, troublesome economic indicators have continued to mount. In Greece, data released this week suggested that Athens might be witnessing the beginnings of a bank run, with worried corporate and individual depositors yanking $7.26 billion out of banks in October, or 4 percent of all the cash in the financial system.

When the euro falls, it indirectly pulls oil prices lower by lifting the value of the US dollar. Oil is priced in dollars, and it becomes more expensive and less attractive as an investment to foreign buyers as the US dollar rises.

Asian Stock Markets

Asian stock markets fell Thursday as Japanese business confidence dropped and higher borrowing costs for Italy sparked worries over the ability of European governments to get a grip on their ever burgeoning debts.

Japan’s Nikkei 225 index shed 1.1 percent to 8,423.87. South Korea’s Kospi lost 1.8 percent to 1,823.53 and Hong Kong’s Hang Seng tumbled 1.9 percent to 18,014.70. Australia’s S&P/ASX 200 dropped 1.1 percent to 4,143.20.

“Risk appetite has flown out the window, showing traders are readying themselves for a European recession.” said Ben Taylor, sales trader at CMC Markets, Sydney.

“The sharp drop in the euro over recent days is finally beginning to reflect an FX market coming to terms with reality. It was inevitable that after yet another disappointing EU Summit outcome the euro should feel some pressure although it has taken the absence of major Middle Eastern and Chinese demand for the currency to see it fall.” said Mitul Kotecha, Head of Global FX Strategy at Credit Agricole.

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Brent oil trading back over $106 after gloom hits markets and crude prices