Oil fluctuates on Italian government debt fears, positive US economic data

NEW YORK, N.Y. – The price of oil bounced around Tuesday as investors weighed the implications of political uncertainty in Italy against a rash of positive U.S. economic indicators and the latest assessment of the economy from the head of the Federal Reserve.

Benchmark West Texas crude for April delivery was down 50 cents at US$92.61 a barrel in morning trading on the New York Mercantile Exchange. The price had dropped below US$92 earlier and also briefly rallied into positive territory.

Stock and commodities markets were initially rattled by the possibility of political paralysis in Italy after nearly complete results in crucial national elections showed no clear winner. Investors worried that the uncertainty could intensify Europe’s debt crisis.

“It seems that Italy is repeating the same story as Greece, bringing renewed uncertainty about European political and economic conditions and further volatility and nervous trading across the markets,” said a report from Sucden Financial Research in London.

Oil cut into the early losses after U.S. economic data showed further improvement in sales of new homes and housing prices, as well as an increase in consumer confidence. U.S. stock indexes rose, looking to reverse a sharp decline on Monday.

The focus now turns to Federal Reserve chairman Ben Bernanke, who delivered the central bank’s semiannual report on the U.S. economy to Congress. In his opening remarks, Bernanke signalled that the Fed’s efforts to keep borrowing costs low would continue.

Investors will also be monitoring fresh information on U.S. stockpiles of crude oil. Data for the week ended Feb. 22 are expected to show a build of 2.6 million barrels in crude oil stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

In London, Brent crude was down $1.35 at US$113.09 on the ICE futures exchange.

In other energy futures trading on the Nymex, wholesale gasoline fell six cents to US$3.20 a U.S. gallon (3.79 litres), heating oil dropped five cents to US$3.04 a gallon and natural gas fell a penny to US$3.40 per 1,000 cubic feet.

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