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Oil up in Asia on Draghi pledges support for euro

New York’s main contract, light sweet crude for delivery in September, was up 41 cents to $89.80 a barrel and Brent North Sea crude for September gained 52 cents to $105.78 in the afternoon.

Draghi’s rousing vow of support for the single European currency issued late Thursday inspired crude traders to enter the market again, analysts said.

“Markets cheered after European Central Bank president Mario Draghi said yesterday that the ECB is ready, within its mandate, ‘to do whatever its takes to preserve the euro’,” DBS Group Research said in a report.

Draghi’s remarks helped boost the euro against the dollar, lending support to dollar-priced oil.

The single currency had climbed to a two-week high of $1.2330 following Draghi’s pledge and was steady against other currencies in Asian trade on Friday afternoon.

Draghi’s remarks also fuelled speculation the ECB would make further bond purchases to help bring down high sovereign borrowing costs, particularly for Italy and Spain.

Analysts expect oil prices to remain volatile in the coming months, with Dutch bank ABN Amro saying that tensions in the crude-producing Middle East “could remain the most important driver for oil prices” in the third quarter of this year.

“We expect volatility to remain high but prices to trade within small ranges ultimately,” it said, with the European debt crisis and economic developments in the US and China also seen as key factors in the market.