Oil rallies above 77 dollars on eurozone aid

SINGAPORE: Oil prices rallied above 77 dollars in Asian trade Monday after Europe and the IMF agreed on a massive aid package for Greece and other troubled eurozone countries, analysts said.

New York”s main contract, light sweet crude for June delivery, climbed 2.47 dollars to 77.58 dollars a barrel, while Brent North Sea crude for June advanced 2.23 dollars to 80.50 dollars.

The European aid deal pushed the euro higher against the dollar and helped oil prices to rally as a weaker greenback makes dollar-priced oil cheaper for holders of weaker units, stimulating demand and leading to higher prices.

New York crude had slumped from a 19-month peak of 87.15 dollars a barrel reached on May 3 due to worries the crisis in Europe could threaten the global economic recovery.

“In the short term, (the aid package) definitely gave confidence to investors,” Clarence Chu, a Singapore-based oil trader with Hudson Capital, said.

He said the deal may not be enough to stave off uncertainties about the health of other eurozone economies, but could lead to oil prices returning to more than 80 dollars during the week.

“I think prices definitely could go back up to around 80 dollars, but in general, people are not as optimistic as they were two weeks ago,” said Chu.

“(The deal) just postpones the defaults because if they have a pile of money waiting, there is less incentive for them to cut down their budget deficits.”

Europe on Monday agreed a package of crisis aid for troubled eurozone countries that Spanish finance minister Elena Salgado said could hit a total of 750 billion euros.

The package would consist of 440 billion euros from eurozone countries and another 60 billion euros of loan funds from the European Commission, while the International Monetary Fund would contribute another 250 billion euro.

EU crafts $962 billion show of force to halt crisis

ATHENS: European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Stocks surged around the world, the euro strengthened and commodities rallied.

Jolted by last week”s slide in the currency and soaring bond yields in Portugal and Spain, European Union finance chiefs met in a 14-hour session in Brussels overnight. The 16 euro nations agreed in a statement to offer as much as 750 billion euros ($962 billion), including International Monetary Fund backing, to countries facing instability and the European Central Bank said it will buy government and private debt.

The rescue package for Europe”s sovereign debtors comes little more than a year after the waning of the last crisis, caused by the U.S. mortgage-market collapse, which wreaked $1.8 trillion of global credit losses and writedowns. Under U.S. and Asian pressure to stabilize markets, Europe”s governments bet their show of force would prevent a sovereign-debt collapse and muffle speculation the 11-year-old euro might break apart.

“A very thick line has been drawn in the sand,” said Andrew Bosomworth, Munich-based head of portfolio management at Pacific Investment Management Co. and a former ECB official. “This is all in. What more could they have done?”

A 110 billion-euro bailout package for Greece approved last week by the EU and IMF failed to reassure investors, prompting yesterday”s renewed bid to bolster the euro.

Under the loan package, euro-area governments pledged 440 billion euros in loans or guarantees, with 60 billion euros more in loans from the EU”s budget and as much as 250 billion euros from the International Monetary Fund.

“They will have bought themselves a significant amount of time to do the right thing,” said Barry Eichengreen, an economics professor at the University of California, Berkeley.

In a step that skirts EU rules barring direct central bank lending to governments, the ECB said it will conduct “interventions” to ensure “depth and liquidity” in markets. The purchases will be sterilized, meaning they won”t increase the overall money supply in the financial system.

“This sets a precedent for the rest of the life of the Central Bank and will have likely surprised even the most seasoned observers,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “While the ECB”s intervention might attract bad press regarding its mandate and independence, we believe that this was necessary to short circuit the negative feedback loop which was getting more and more threatening for the global economy.”

Royal Bank Of Scotland Posts $3 Billion 3Q Loss

Royal Bank Of Scotland Posts $3 Billion 3Q Loss: Government-controlled Royal Bank of Scotland Group PLC on Friday reported a net loss of 1.8 billion pounds ($3 billion) but that underlying profits had improved and lending to companies increased 5 percent. Full recovery from its near collapse a year ago will take years, its chief executive Stephen Hester said. For the three months ending Sept.

Royal Bank Of Scotland Posts $3 Billion 3Q Loss:Government-controlled Royal Bank of Scotland Group PLC on Friday reported a net loss of 1.8 billion pounds ($3 billion) but that underlying profits had improved and lending to companies increased 5 percent.

Full recovery from its near collapse a year ago will take years, its chief executive Stephen Hester said.

For the three months ending Sept. 30, RBS reported total income of 7.1 billion pounds, compared to 8.6 billion pounds a year earlier.

However, the bank booked impairment losses of 3.3 billion pounds, up from 1.3 billion a year earlier. Impairments for the first three quarters of this year rose to 10.8 billion pounds.

Without the impairments, operating profit rose 55 percent to 1.75 billion pounds.

Hester said the results affirmed his confidence that RBS can recover as a strong company.

“The results also show the headwinds we face and the legacy we are purposefully working out of,” he said. “As I have repeatedly said, the journey will take some years.