Oil prices fluctuated Thursday, driven by confirmation of European sanctions on Iran, renewed concerns over sovereign debt crisis in the Eurozone and better-than-expected US economic data. The front-month contract for WTI crude oil faltered below Wednesday's close of 103.74 and dropped to as low as 101.3 before settling at 101.81, down -1.37%, while the equivalent Brent crude contract initially spiking higher to 114.64 before ending the day at 102.74, down -0.08%. Gold climbed higher for a 4th straight day yesterday as the US dollar weakens.
The EU has agreed to ban imports of Iranian oil. This should help boost oil prices if demand remains unchanged while supply drops. However, it's also reported that Saudi Arabia would increase supply to countries originally importing oil from Iran. Net net, it may force Iran to push oil supply at a discount in the near-term, pressuring oil prices.
In the Eurozone, the debt crisis remained an overhang and the issue was put under the spotlight after France's auction resulted in higher funding costs of the country's debt. The government sold 4.02B euro of bonds maturing in October 2021 at an average yield of 3.29%, up from 3.18% on December 1. Moreover, the bid-to-cover ratio for the 10-year-bond fell to 1.64 from 3.05 in the previous auction. The ratio for the 2041 bonds was 1.82 times while the ratios for 2023 and 2035 bonds were 3.22 and 2.02 respectively.
The dataflow in the US delivered some pleasant surprises once again. Initial jobless claims fell -9K to 372K in the week ended December 31, compared with consensus of a drop to 375K. ADP reported that the number of payrolls increased 325K in December while the market had anticipated an addition of 175K only. ISM non-manufacturing data climbed to 52.6 in December from 52 a month ago. While the data missed consensus of 53, it suggested the US services sector stayed in the expansionary territory.