Concern eases, but caution is still there (ISFM) (25-02-2011)

The relief at the end of a particularly turbulent week came after oil prices dropped sharply on speculation that Saudi Arabia could step up its oil production to make up for lost supplies from Libya, which is still in turmoil after the uprising by its people.

Earlier in Asia, most of the region's stock markets advanced as investors put the Mideast and North Africa turmoil to one side and focused on bargain hunting among beaten-down shares after an overnight retreat in crude-oil prices.

With the oil output in Libya heavily affected by the conflict, prices shot up yesterday, but retreated considerably with Brent crude was up to $112.14 a barrel, still $7 below its high point on Thursday, and its New York counterpart rate was up to $97.65 a barrel, also around $5 down from the previous day's peak.

In Europe, markets advanced as the price of oil slipped below $100 a barrel, but turmoil in Libya continued to fuel uncertainty over supplies and weigh on investors’ sentiment as a rocky week for equities drew to a close. Libya was likely to continue to dominate sentiment as the trading week comes to a nervous end, but the biggest worry is whether the crisis spreads through the Persian Gulf's bigger energy producers. Bahrain has seen some heavy protesting and Saudi Arabia's royal family has announced a massive $36 billion package of benefits earlier this week; contagion of the crisis in the largest oil producer could send the price of oil skyrocketing and plunge the world economy back into recession.

On Wall Street, the improved sentiment was hurt by the release of data showing that growth in the last quarter of last year was slower than originally estimated, but stocks rose at the open after the week-long sell-off, as oil prices eased from recent highs.

Source: ISFM