LONDON: Oil fell more than $2 toward $34 a barrel yesterday after Russia and Ukraine signed a 10-year gas deal clearing the way for the resumption of supplies to a freezing Europe.
US crude oil futures for February delivery dipped to a low of $33.89, down $2.62, before recovering to trade at $34.53 by 1800 GMT.
Traders said the February US crude oil futures contract also fell because of very high stocks at the delivery point for the U.S. futures contract. Only just over 3,100 lots were traded on the February US crude contract. The March contract was much more active as more than 31,000 lots changed hands. London Brent crude for March fell to a low of $43.80, down $2.77, before edging back up to around $44.50. The agreement between Russia and Ukraine, which set a final price for 2009 supplies, is expected to lead to the restart of flows of Russian natural gas to Europe via Ukraine within the next 36 hours.
Prices came under pressure on Friday after the International Energy Agency, an adviser to industrialized countries, predicted a fall in world oil demand in 2009.
Meanwhile, European stocks closed lower yesterday. In London, the FTSE 100 index fell 0.93 percent to 4,108.47 points, in Paris the CAC-40 was down 0.90 percent to finish at 2,989.69 points while in Frankfurt the DAX lost 1.15 percent at 4,316.14. Elsewhere, in Asia, most Asian stock markets have risen modestly. Japan’s Nikkei 225 stock average edged up 26.70 points, or 0.3 percent, to 8,256.85, South Korea’s Kospi gained 1.4 percent to 1,150.65 and India’s Sensex inched up 5.98 points, or 0.06 percent, to 9,329.57.