Oil prices rose above $100 a barrel on Wednesday as investors hoped a European Central Bank (ECB) policy meeting later would steer the euro zone out of crises. The higher oil prices will be a psychological boost and give the Central Bank of Nigeria (CBN) more ammunition in its fight to stabilise the naira, which has come under pressure in recent times.
In late Wednesday afternoon London deals, Brent North Sea crude for July rallied $US2.01 to $US100.85 per barrel.
New York’s main contract, West Texas Intermediate crude for delivery in July gained $US1.60 to $US85.89.
The naira rose for the first time in four days, reversing an earlier drop, as the CBN was said to sell dollars to lenders outside its scheduled currency auction on Wednesday.
The naira jumped 0.7 percent to 161.14 per dollar as of 3:38 p.m. having earlier declined toward the lowest since December 27.
“The CBN intervened aggressively before today’s (Wednesday) session closed and sold dollars to market players,” Samir Gadio, a London-based emerging markets strategist at Standard Bank Group Ltd., said. “Because the CBN had been out of the market for the past two days, it is possible that banks had not positioned for the size of the intervention.”
The CBN sold $300 million at a currency auction on Wednesday, taking the total sold at the official window this week to $600 million, the most since February, the CBN said in an e-mailed statement on Wednesday.
The Federal Government’s budget is based on a benchmark oil price of $72/ barrel. Analysts have said that any oil price below $95/ barrel would put pressure on the public finances of Africa’s second largest economy.
“A slight brightening of sentiment on the financial markets and a weaker US dollar are putting wind in the sails of oil,” said Commerzbank analyst Carsten Fritsch.
European and US stock markets shot higher on Wednesday, with sentiment helped by the European Central Bank’s (ECB) decision to keep cash flowing to beleaguered eurozone banks even if it left interest rates on hold.
ECB chief Mario Draghi downplayed the eurozone debt crisis after the central bank held rates unchanged at 1.0 percent, saying it was unlike the situation after the 2008 Lehman Brothers bankruptcy sent global markets into a tailspin.
“To a great extent we know exactly what (the) problems are now,” the ECB president said, adding: “I don’t think the situation is at all as bad as it was.”
Prices were also buoyed after G7 European leaders vowed on Tuesday to respond “speedily” to the debt crisis.
Traders, meanwhile, shrugged off news of a smaller-than-expected decline in stockpiles in the United States, the world’s biggest oil consuming nation.
US American crude inventories fell by just 100,000 barrels in the week ending June 1, far less than market expectations for a drop of 400,000 barrels, according to analysts polled by Dow Jones newswires.
Elsewhere, the European Union called on Iran to sign an accord with the International Atomic Energy Agency (IAEA) that would enable the UN watchdog to verify the nature of its controversial nuclear activities.
IAEA chief Yukiya Amano said after visiting Iran in May that Tehran would soon sign a deal to allow greater access to sites, documents and people involved in its nuclear programme – but no such agreement has yet emerged.
The IAEA, which is holding a new round of talks with Iran in Vienna on Friday, has been seeking access to the Parchin base near Tehran, where it believes suspicious explosives testing has been carried out.
Key crude producer Iran has denied the IAEA demands, insisting the site is of no significance to its nuclear programme.