London: Brent crude rose towards $113 a barrel on Friday on investor speculation that European leaders could soon reach a rescue deal on the euro zone debt crisis and on early hints that China may loosen credit as inflation cools.
G-20 finance chiefs and central bank heads are meeting in a Paris summit as leaders aim to thrash out a crisis resolution in time for a European Union summit on 23 October.
November Brent crude rose $1.74 to $112.85 a barrel by 3:33pm, on the day of its expiry, having risen in seven of the past eight sessions. The December contract was also stronger on Friday but stood at a $2 discount to November.
US crude was up $1.18 at $85.41 a barrel.
“The sentiment is better because the price of failing to find a solution in Europe is too high. I think the point is they know they don’t have a choice,” said Andrey Kryuchenkov, analyst at VTB Capital.
Slovakia finally ratified new powers for the euro zone’s rescue fund on Thursday, the last country to do so, clearing the way for a bolder effort to arrest Europe’s sovereign debt crisis.
Prices also received support from a dip in Chinese inflation to 6.1% in September, indicating that the central bank may at last put on hold further tightening of its monetary policy that has slowed economic growth and fuel consumption.
Less price pressures may allow the Chinese central bank to look at easing monetary policy, said Jeremy Friesen, a Hong Kong-based analyst at Societe Generale.
“If that helps consumer spending and prevents a slowdown in construction, it would be positive for global commodities,” he added.
The dollar was slightly lower on Friday and is down more than 2% from the start of the week, giving a boost to commodity prices across the board by making them cheaper for non-dollar buyers
Supply disruptions in Nigeria and the North Sea as well as still irregular exports from Libya have cut global output of some of the best quality light, sweet oil so far this quarter.
Brent has risen 12% since briefly dipping below the psychologically-important $100 a barrel level in early October. This has driven Brent to record highs versus the US benchmark and on Friday the spread was over $27 a barrel.
A power contest between Opec members Saudi Arabia and Iran is also helping to support Brent by adding a political risk premium to prices, analysts said.
Saudi Arabia and the United States traded charges with Iran earlier this week over an alleged plot to kill the Saudi ambassador to Washington, prompting US President Obama to warn Iran that it would face the toughest possible sanctions for its role.
“We knew they (Saudi Arabia and Iran) were not good friends and now there’s a new struggle between two of the biggest members in Opec,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. Opec is set to meet again to discuss policy on 14 December in Vienna.
Traders will look to US retail sales and confidence data later on Friday for an indication of the economic health of the world’s top oil consumer.
US crude oil stocks rose more than expected last week as imports rose but oil product inventories surprised with larger-than-expected drawdowns, US Energy Information Administration data showed.