While you were sleeping: Oil continues climb

While you were sleeping: Oil continues climb

(BusinessDesk) February 24 - Equities on Wall Street and in Europe extended declines, while oil prices maintained their climb, as the turmoil in Libya showed no signs of abating.

Brent crude futures rallied above US$110 a barrel on Wednesday.

Nuri al-Mismari, former chief of protocol to Libyan leader Muammar Gaddafi, said the escalating uprising might topple the regime within days. al-Mismari’s comments come a day after Gaddafi vowed he would not step down.

In early afternoon trading, the Dow Jones Industrial Average shed 0.66%, the Standard & Poor's 500 Index dropped 0.78% and the Nasdaq Composite Index declined 1.47%.

Covering short positions helped limit Wednesday's losses, Chris Burba, short-term market technician at Standard & Poor's in New York, told Reuters.

"But odds favour downside in the near term ... The pace of the advance is slowing and that behaviour often precedes a consolidation or a downturn," he said.

The CBOE Volatility index, the market’s so-called fear gauge, jumped 8%.

Also weighing on the Dow was Hewlett-Packard Co after the company slashed its 2011 revenue forecast because of waning consumer demand for its personal computers.

On the economic data front, it was a mixed bag as U.S. existing home sales climbed unexpectedly in January, though home prices weakened to their lowest level in almost nine years.

Across the Atlantic, the Stoxx Europe 600 Index dropped 1.1%.

The continuing rise in oil prices hurt Air France-KLM Group, while OMV AG, central Europe’s biggest oil company, said production would come to a standstill in Libya.

The euro strengthened against the greenback amid expectations that interest rates in the euro zone would rise sooner than those in the U.S.

Rates may also soon climb in the U.K., as minutes to the Bank of England's February policy meeting showed a third policymaker voted for an increase while others would consider one if UK economic recovery resumed.

"The interest rate story is the main driver for euro and sterling as market players try to price in the fact that rate hikes may be starting earlier than previously expected," Stephan Maier, currency strategist at Unicredit in Milan, told Reuters.

European Central Bank President Jean-Claude Trichet is scheduled to speak later today.

The euro rose 0.6% to US$1.3736. Sterling was 0.7% stronger at US$1.6243.

The U.S. currency fell 0.4% against a basket of currencies.

In London, ICE Brent crude for April delivery gained 3.8% to US$109.79 a barrel. Earlier, in the session it rose as high as US$110.35, the highest since September 2, 2008.

"I don't think Libya alone will take us to US$150 a barrel, but, if unrest spreads in the Gulf countries, we could easily get there. That is why it is imperative the Saudis release some extra barrels into the market now to calm the situation, rather than simply trying to talk the price down," Edward Meir, an analyst at MF Global in New York, told Reuters.

Meanwhile, U.S. Treasury Secretary Timothy Geithner said the economic rebound had put the world on a better footing to deal with the climb in oil prices caused by the Middle East chaos.

“The economy is in a much stronger position to handle” rising oil prices, Geithner said during a Bloomberg Breakfast in Washington. “Central banks have a lot of experience in managing these things.”

Spot gold was bid at US$1,411.10 an ounce at 1600 GMT, against US$1,399.20 late in New York on Tuesday.

(BusinessDesk)

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