Brent crude oil firm above $118, price taking cues from debt situation in Europe

The price of Brent crude oil opens today’s trading session firm over $118 a barrel as investors remained cautious ahead of a key Spanish bond auction, with renewed fears of the European debt crisis keeping a lid on oil demand and prices.

Latest Brent Oil Price

In London, Brent crude oil futures for June 2012 delivery was trading at $118.42 a barrel, 08.18 GMT today on the ICE Futures Exchange.

Spanish Bond Auction

A more challenging longer term debt sale looms on Thursday, when Spain attempts to sell 2 and 10 year bonds, even as an auction of 12 and 18 month Spanish debt earlier this week was considered a success. Investors see the sales as a test of demand for the country’s debt.

“There is potentially a good upside if yields are low. However, if Spain’s cost of debt breaches the six percent barrier, expect a sell off in equities and commodity instruments and a shift to the safe haven of US and German treasuries to emerge.” Miguel Audencial of CMC Markets wrote in a note on Thursday.

“With the highest unemployment rate in the Euro zone and returning into recession this year, Spain is in danger of entering a debt/recession spiral whilst it seeks to reassure on its commitment to fiscal austerity.” DBS Bank said in a commentary.

Iran Nuclear Programme

However, Brent oil prices found some support by renewed concerns over West Asian supply owing to the standoff between key producer Iran and the West over Tehran’s nuclear programme.

“The situation with Iran is still a supporting factor because it is still not resolved after the talks.” said Mr Ken Hasegawa, energy desk manager at Newedge brokerage in Japan.

Meanwhile, 15 people have been arrested in Iran accused of conspiring to assassinate one of the country’s nuclear specialists, Tehran declared on Wednesday. An Israeli spy base in a neighbouring country has also been uncovered.

­Iran’s Intelligence Ministry says the arrested group spied for Israel. It also linked the group’s activities to a series of killings of Iranian nuclear scientists. Since 2007 the assassination spree has left at least 5 top Iranian nuclear experts dead, delivering a massive blow to the country’s energy program.

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Brent crude oil firm above $118, price taking cues from debt situation in Europe