London: Oil rose on Thursday, as concerns about instability in the Middle East outweighed worries about the economic health of the eurozone following the resignation of Portugal’s prime minister.
May Brent rose 18 cents to $115.73 a barrel at 2:49pm, US crude was up 68 cents to $105.43, supported by a steep decline in US gasoline stockpiles for the week to 18 March.
The fall in gasoline inventories was due to refiners shedding winter grade gasoline ahead of the shift to summer grade, and drove US crude to its highest settlement since 2008 on Wednesday.
“We have a tug of war between positive and negative factors for oil prices,” said Carsten Fritsch, an oil analyst at Commerzbank.
“The bullish factors are still in place: the war in Libya, unrest in other parts of the Arab world, a greater need for fossil fuels in Japan, and pretty bullish inventory data yesterday are all supportive of higher oil prices.”
Fritsch said that despite the resignation of Portugal’s Prime Minister Jose Socrates, which had weighed on oil overnight, oil prices could probably rise further.
“The developments in Libya and the Middle East are still the most important factor to watch,” he said.
Socrates resigned on Wednesday after the Portuguese parliament rejected his government’s latest austerity measures, which were designed to avoid a bailout.
The resignation was seen as increasing the likelihood that Portugal will join Greece and Ireland in requiring a bailout from the European Union, putting the euro under pressure.
The dollar strengthened by 0.2% against a basket of currencies.
Eurozone leaders will meet in Brussels later on Thursday for a two-day summit. Portugal has a large debt redemption to meet in April but according to its constitution it does not have time to hold a general election before then, said Thorbjorn Bak Jensen, an oil market analyst at Global Risk Management.
“The resignation of the Portuguese prime minister is creating some risk on/risk off (trading), depending on which way the wind is blowing,” he said.
“We have had some positive numbers this morning for German manufacturing and service PMI, but we still have this Portugal ghost hanging over us. What are they going to do?”
Western warplanes hit Libya for a fifth night. The UN-backed assault has so far failed to stop Muammar Gaddafi’s tanks shelling rebel-held towns or dislodge his armour from a strategic junction in the east.
Palestinian rockets struck two cities deep in Israel on Wednesday, prompting Prime Minister Benjamin Netanyahu to threaten lengthy “exchanges of blows” with the Hamas-ruled Gaza Strip.
Syrian forces killed six people in an attack on protesters in a mosque complex in the southern city of Deraa, and later opened fire on hundreds of youths marching in solidarity, witnesses said.
In the Arabian peninsula, Yemen’s president offered to step down by the end of the year in a bid to appease mounting demands for his resignation, but opposition groups showed no sign of easing up on efforts to force him out.