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Oil prices climb on weaker dollar

Oil prices rose on Tuesday as markets tracked developments over Cyprus and reacted to a weaker dollar, analysts said.

Brent North Sea crude for delivery in May increased by 15 cents to $108.32 in London midday deals.

New York’s main contract, light sweet crude for May, gained 68 cents to $95.49 a barrel.

“Support is coming from a slightly weaker dollar and a better tone to global equities, although shares in Asia fell earlier today on worries that the resolution to the crisis in Cyprus has set a confiscatory precedent that puts depositors and bond holders in other peripheral Europe countries at risk,” said Addison Armstrong at traders Tradition Energy.

Jeroen Dijsselbloem, who heads the Eurogroup of finance ministers, said in an interview published on Monday that the cost of bank recapitalisation should not fall on the public sector but on bondholders, shareholders and, if necessary, uninsured deposit holders.

The comment to the Financial Times, widely interpreted as a signal that the bailout for Cyprus would become a template for handling fragile banks in the ongoing eurozone crisis, sent global markets falling sharply on Monday.

Dijsselbloem later released a statement via Twitter saying Cyprus was a “specific” case.

“Cyprus has touched the nerves of a lot of people. I guess the question is who will be next, and what pressure such a deal will have on the ability of Cyprus to trade out of their issues,” said Jonathan Barratt, chief executive officer at Barratt’s Bulletin in Sydney.

“It raises a lot of questions about what is next for them, and what other nations within the EU will be subject to if they have a debt crisis,” he told AFP.

The European Union and International Monetary Fund on Monday struck a last-minute deal with Cyprus that will qualify the island for a much-needed rescue package to help it service its debt.

The agreement involves breaking up the island’s second largest lender Laiki (Popular Bank), while deposits above 100,000 euros ($130,000) in Bank of Cyprus, the island’s main lender, will take a major “haircut.”