(EnergyAsia, June 12 2012, Tuesday) — Crude oil futures swung between delirious and gloom in late US trading yesterday with Brent starting the week on a high in response to news of the Spanish bank bailout and then collapsing at the close as reality of the spreading Eurozone mess set in.

Brent crude crashed to US$96.75 a barrel after touching a high of US$102.21 while US WTI fell to US$81.65 from an intra-day high of US$86.64. Brent, trading below the psychological US$100 a barrel since last week, could fall below the 17-month low of US$95.63 reached on June 4. That level was previously reached on January 26 2011.

The two global crude benchmarks got off to a flying start in Asia yesterday extending briefly into the US day in response to news that the Eurozone finance ministers had agreed on Saturday to lend Spain up to 100 billion euros or US$125 billion, a sum far larger than had been expected.

Oil was also briefly lifted by reports that Saudi Arabia had slashed output to around 9.8 million b/d last month from 10.1 million b/d in April, talks that OPEC’s June 14 meeting could lead to an output reduction, and that China had increased crude imports by more than 18% year-on-year to a record six million b/d last month.
But sentiments reversed course during the US trading day as the Spanish bailout deal revealed the extent of the Eurozone economic crisis, and its growing global reach.

The Europe-exposed economies of China and India are rapidly slowing, with India being threatened with an investment downgrade to junk status by ratings agency S&P.

For now, the potential for a US-Israel conflict with Iran over the latter’s nuclear energy programme has greatly receded, lessening the threat to oil supply disruption from the Middle East.

Iran is scheduled to meet with six global powers, the US, France, Russia, China, Germany and Britain, for a third time this year in Moscow on June 18-19 to discuss to discuss the nuclear issue.