Singapore: Brent crude rose above $111 a barrel on Wednesday, gaining for a second straight session on fears that tensions between Iran and the West may escalate with US lawmakers mulling more sanctions on Tehran, while promising China data also supported sentiment.
Leading U.S. lawmakers are considering adding measures to a new package of sanctions that would single out Iran’s national oil and shipping companies and restrict its ability to tap into electronic banking services.
Brent crude rose 44 cents to $111.42 a barrel by 0435 GMT. US crude gained 20 cents to $98.68 a barrel.
Oil is expected to stay rangebound this week as bullish and bearish factors tug the markets at both ends, analysts say.
“There’s the positive factor of supply worries from Iran and South Sudan while on the other side, we have a bearish factor from a weaker economy in Europe that will reduce oil demand,” Ken Hasegawa, a commodity sales manager at Newedge Japan, said.
The United States imposed the harshest sanctions so far on Iran when President Barack Obama on 31 December signed into law new sanctions on transactions involving Iran’s central bank while the European Union last week imposed a ban on the import, purchase or transport of Iranian oil.
Iran is feeling the bite from economic sanctions imposed over its nuclear program, which is capable of producing a weapon although Iranian leaders have not yet decided to do so, top US intelligence chiefs told Congress.
Besides Iran, a dispute between Sudan and South Sudan on oil transit fees dragged on, adding to supply concerns. The newly independent South Sudan has shut its production estimated at 350,000 barrels per day (bpd).
Hasegawa sees support for Brent crude at $110 per barrel with gains capped at $112.50, and expects US crude to stay between $98 and $103 per barrel this week.
GLOBAL ECONOMY EYED
Oil prices were also boosted by China’s official Purchasing Managers’ Index that showed the manufacturing sector expanded modestly in January, with the index reading inching up to 50.5 from 50.3 in December, above a 49.5 reading forecast.
But the finance minister warned that the country -- the world’s top energy consumer -- faces downward risks in 2012, as the weakening external demand add more difficulties to the growth of the country’s export sector.
Worries about the euro zone debt crisis and slowing growth in the United States continue to weigh on investors sentiment.
Near-bankrupt Greece must make “difficult” decisions in the coming days to clinch a debt swap agreement and a €130 billion bailout package needed to avoid an unruly default, the government said on Tuesday.
In the United States, data showed home prices dropped more than expected in November, while consumer confidence soured in January.
The market is also eyeing US oil stocks data scheduled to be released later on Wednesday for clues on demand from the world’s largest oil consumer.
US crude oil inventories rose by 2.1 million barrels last week, the industry group American Petroleum Institute said in a report late on Tuesday, close to analysts’ expectations of a 2.4 million barrels build in a Reuters poll.