Thursday, October 27, 2011

Oil gains more than $2 on EU rescue plan

Oil prices rose more than $2 on Thursday, after European leaders struck a deal with private holders of Greek debt to write down half their holdings and agreed to boost the region's rescue fund.

Euro zone leaders made a pact with private banks and insurers on Thursday for them to accept a 50 percent loss on their Greek government bonds under a plan to lower Greece's debt burden and try to contain the two-year-old euro zone crisis.

Greek Prime Minister George Papandreou said he expected the deal, which will be implemented through a bond exchange, to be wrapped up by the end of the year.

At 0721 GMT (3:21 a.m. EDT), Brent crude was up $1.80 at $110.71 a barrel, after touching a high of $110.96 earlier. U.S. crude gained $1.90 to $92.10 a barrel, down from an intraday high of $92.43.

"The macro event and the financial markets are leading and oil futures are reacting even though the crude inventories in the U.S. have increased substantially," said Victor Shum of Purvin & Gertz.

The Nikkei share average shrugged off concerns about the yen's strength and rose 2 percent on Thursday, on expectations the euro zone leaders' agreement to address Europe's debt will contain the crisis.

The new version of the euro zone's rescue fund will be leveraged four or five times, giving it firepower equivalent to about 1 trillion euros ($1.4 trillion), French President Nicolas Sarkozy said on Thursday.

"Investors' optimism and increased risk appetite could result in the rally of risk assets in the short term," said analyst Ong Yi Ling at Phillip Futures Singapore.

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