Singapore: Brent crude rose slightly to trade above $108 on Tuesday, supported by supply disruptions in Syria and Iranian naval exercises in a key shipping lane, while improved US home sales data and year-end short-covering also supported prices.
Brent, which rose to an intraday high of $108.30 per barrel, was trading up 14 cents at $108.10 at 12:15 pm. US crude eased 20 cents to $99.48 a barrel.
“Syria could be a support factor for the time being, but we will not see a big climb or rocket high prices because of that,” Ken Hasegawa, a derivatives manager with brokerage Newedge in Tokyo, said.
“So far, supply disruptions have not been a big issue because of some easing of demand in Europe. This has offset the disruption of supplies.”
Syrian oil minister Sufian Alao said on Saturday that his country’s oil production had fallen by about 30 to 35% as a result of sanctions imposed on Syria over its nine-month crackdown on anti-government protests.
Iranian naval exercises also added to supply worries.
Iran on Saturday began 10 days of naval exercises in the Strait of Hormuz, raising concern about a possible closure of the world’s most strategic oil transit channel in the event of any outbreak of military conflict between Tehran and the West.
But Hasegawa said the impact of the naval exercises on prices was limited for now as there was plenty of supply from Opec countries.
Kuwait produced more than 3 million barrels of oil in December and expects that rate to continue if demand exists, its oil minister Mohammad al-Busairi said on Sunday after a meeting of Gulf Arab oil ministers in Abu Dhabi.
UK consultancy Oil Movements also said last week that Seaborne oil exports from Opec, excluding Angola and Ecuador, will rise by 400,000 barrels per day (bpd) in the four weeks to 7 January, to reach 23.63 million bpd on average.
The higher supplies come at a time when investors are worried about demand from Europe taking a hit given the region’s crippling debt crisis.
Leaders of Germany’s major business and industry groups said they expect the country’s economy to lose momentum although there will be no recession in 2012.
Industrial output at top energy consumer China is also expected to slow slightly, growing 11% in 2012, easing from an estimated 13.9% in 2011, China’s industry minister said on Monday.
China’s foreign debt rose to $697.2 billion at the end of September from the $642.5 billion three months earlier, China’s State Administration of Foreign Exchange (SAFE) said on Tuesday.
But few doubt that China, which sits on the world’s biggest pile of foreign exchange reserves worth $3.2 trillion, would fail to honour its foreign obligations.
But amid the weak outlook for Europe, positive data came from the United States where new single-family home sales rose to a seven-month high in November and the months’ supply of houses on the market was the lowest in 5-1/2 years, adding to signs of a budding recovery in the sector.
“I am not expecting big movements in the crude oil market this week, but there will be some upside due to short-coverings. Brent is likely to be in the range of $105-$113 this week,” Hasegawa said.
Tetsu Emori, a fund manager with Astramax Co. in Tokyo, also said that trade could be limited on Tuesday because of the year-end holidays.
“It’s after Christmas and a lot of people are not back in the market,” he said, adding that investors will seek cues from US markets which will reopen after a long weekend.