Oil above $93 as EU plans talks on Greek debt vote

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Oil prices rebounded to above $93 a barrel Wednesday as markets digested the Greek prime minister's decision to hold a referendum about his country's latest rescue package and awaited word on possible measures to boost economic growth from the U.S. Federal Reserve.

By early afternoon in Europe, benchmark crude for December delivery was up $1.25 at $93.44 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1 to settle at $92.19 in New York on Tuesday.

In London, Brent crude was up $1.49 at $111.03 a barrel on the ICE Futures exchange.

Greek Prime Minister George Papandreou startled markets Monday by saying he would call for a referendum vote on the agreement to cut Greece's debt level, provide the country with fresh rescue loans, and have bondholders accept 50 percent losses.

Greek labor unions have protested fiscal austerity measures, and if voters reject the debt plan, it could spark a chaotic debt default and a financial crisis.

Papandreou faces a vote of confidence in parliament Friday, which if he loses could scuttle the referendum.

German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed to hold emergency talks on Greece with the EU and the IMF on Wednesday.

"The shock over the Greek referendum has abated somewhat and there are also hopes of further quantitative easing of monetary policy by the Fed," said a commodities report from Commerzbank in Frankfurt.

On Wednesday, the Fed is set to release its updated economic forecast, and Chairman Ben Bernanke will hold a news conference after the U.S. central bank's two-day meeting.

Gains by the euro also contributed to firmer oil prices. A weaker dollar makes crude cheaper for investors holding other currencies. The euro was up to $1.3786 on Wednesday from $1.3715 late Tuesday in New York.

Trading volumes of oil futures have been undermined this week by the bankruptcy of MF Global, a U.S. securities firm run by former Goldman Sachs chief Jon Corzine.

Signs that U.S. crude demand may be improving helped support prices. The American Petroleum Institute said late Tuesday that crude inventories fell 156,000 million barrels last week, while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 1.1 million barrels.

Inventories of gasoline fell 1.1 million barrels last week, while distillates dropped 3.4 million barrels, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data — the market benchmark — later Wednesday.

A report from Goldman Sachs predicted that global demand for crude would rise more than production capacity growth, boosting oil prices.

"It is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand, keeping it in line with available supply," Goldman Sachs said. "Further, we believe that the oil market has been too focused on the downside risks to prices and not focused enough on the upside risk should the economy avoid recession."

In other Nymex trading, heating oil rose 0.6 cent to $3.04 per gallon and gasoline futures gained 1.9 cents at $2.64 per gallon. Natural gas dropped 1.9 cents at $3.76 per 1,000 cubic feet.

___

Alex Kennedy in Singapore contributed to this report.


Copyright 2011 The Associated Press.




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