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Brent oil up above $107 as winter, Mideast support

Brent oil up above $107 as winter, Mideast support
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First Published: Thu, Nov 24 2011. 02 19 PM IST

Updated: Thu, Nov 24 2011. 02 19 PM IST
Singapore: Brent crude rose above $107 on Thursday, recovering from the previous day’s losses, as potential strong winter fuel demand and turmoil in the Middle East offset fears that a global economic slowdown could hurt consumption.
Crude stockpiles in the United States unexpectedly fell last week as refinery rates rose and crude imports were down. A botched German bond sale on Wednesday raised alarm that the crisis could hit even Europe’s largest economy.
Brent crude rose 54 cents to $107.56 a barrel by 2:02pm. Brent is poised for a third year of gains because of the political turmoil in the Middle East.
US crude, set for its second straight week of decline, was up 53 cents at $96.70 a barrel. Trading volume is expected to remain thin as the United States is closed for the Thanksgiving holiday.
Tony Nunan, risk manager at Mitsubishi Corp, said winter and the uncertainty in the Middle East would support the market in the short term.
“OECD inventories are so low and we’re running into winter,” he said. “Seasonally December is the highest demand period.”
US crude inventories fell 6.22 million barrels last week, against an expected increase of 500,000 barrels, data from the US Energy Information (EIA) showed.
Nunan expects Brent to average at $110-$113 a barrel while maintaining a $7-$10 spread with US crude.
Brent’s premium against US crude widened to $11.28, from $10.85 at Wednesday’s close.
Goldman Sachs said on Wednesday the WTI-Brent crude oil spread was likely to widen in the near term following a rapid unwinding in recent weeks, but the reversal of the Seaway pipeline would see it narrow again by the end of 2012.
EURO ZONE
The ongoing debt crisis in the euro zone combined with weaker economic data from China and the United States increased worries that global growth could slow and reduce fuel demand.
A majority of twenty prominent economists polled by Reuters also predicted that the euro zone was unlikely to survive the crisis in its current form, with some envisaging a “core” group that would exclude Greece.
Weaker Chinese factory output worried investors while US consumer spending growth slowed in October and business capital investment plans were weak, raising questions about expectations for solid economic performance in the fourth quarter.
In the Middle East, street clashes flared in Cairo again on Wednesday while an eight-month revolt in Syria dragged on.
“The big issue is, of course, Iran,” added Mitsubishi’s Nunan. “It’s slow moving but sanctions are ratcheting up and it’s a question of whether Israel can wait.”
Israeli Prime Minister Benjamin Netanyahu called on Wednesday for stronger sanctions on Iran than those imposed this week by the United States, Britain and Canada to try to curb its nuclear ambitions.
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First Published: Thu, Nov 24 2011. 02 19 PM IST
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