Brent Gains on Euro Zone Debt Plans

Brent crude futures extended gains on Monday after France and Germany said they would come up with a plan to contain the euro zone crisis, but details will not emerge until the end of the month.

Source: olf.no

Market sentiment improved after leaders of the two countries vowed on Sunday to develop a new plan to deal with Greece's debt issues and recapitalize euro zone banks, although a breakdown of the plan would not be available until the Cannes G20 summit on Nov. 3-4.

A spokesman for the German government emphasized that the confidential talks, aimed to help the euro zone regain the confidence of investors, are no 'miracle cure'.

Crude futures and the euro [EUR=X  1.3651    0.0255  (+1.9%)   ] rose, even as analysts warned about the continued lack of leadership on the euro zone crisis.

"All that has happened is they've postponed the decision once more: they've kicked the can down to Cannes," CMC markets analyst Michael Hewson said. "We're slightly more positive, but we're not out of the woods yet."

November Brent crude futures [LCOCV1  108.87    2.99  (+2.82%)   ] were $2.36 firmer at $108.24 a barrel. The contract posted an increase of 4.5 percent last week, its best performance since the week to July 8.

U.S. November crude [CLCV1  85.67    2.69  (+3.24%)   ] led the gains and was up $2.49 at $85.47 a barrel, after hitting highs of $85.50 a barrel earlier.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said on Sunday their goal was to come up with a sustainable answer for Greece's woes, agree how to recapitalize European banks and present a plan for accelerating economic coordination in the euro zone by the Cannes meeting.

"Merkel and Sarkozy met again and could not decide anything apart from trying to reassure us that they will have some proposals out before the G-20 meeting," Petromatrix's Olivier Jakob said in a note to clients. "New proposals by the end of the month do not necessarily translate into any action in the short term."

"At some point, words will need to be replaced by concrete action," MF Global analysts wrote in their morning note.

Longs cut, Saudi supply

The recent gains in crude prices could be undercut by investor positioning. IntercontinentalExchange (ICE) data showed on Monday that speculators had cut their net long positions on both ICE Brent crude oil and gasoil futures in the week to Oct. 4.

Last week, U.S. speculators opened new short positions to bet on further price falls on U.S. crude, data from the Commodity Futures Trading Commission showed on Friday.

Top world crude exporter Saudi Arabia in November will supply full contracted volumes of crude oil to at least four Asian term buyers and also keep steady the supply to customers in Europe, with both regions little changed from October, industry sources said on Monday. 

Saudi Arabia sees neither a decline in global oil demand nor a reduction in the kingdom's exports due to increased output from Libya, Oil Minister Ali al-Naimi said on Sunday.

On the day before, Naimi said September output fell to 9.39 million barrels per day (bpd) from around 9.8 million bpd in August. 

CNBC.COM