NEW YORK: Brent crude oil rose above $105 a barrel yesterday but trading was choppy and prices were pulled both ways by more signs of economic weakness and the perception of an increased risk to Middle East supply after Israeli air strikes on Syria.
Brent crude was up 92 cents at $105.11 at 1.55pm EDT (1755 GMT), having earlier touched $105.49, the highest since April 11. US oil was up 30 cents at $95.91, having earlier reached $97.17.
Brent is up by nearly $7 since last Wednesday and posted its largest three-day rise since August 2012, leaving it prone to some profit-taking, traders said, especially as the global economy shows few signs of strong growth.
“In another lifetime, the Israeli headlines would have sent the market screaming higher, but there does seem to be this malaise about economic contraction,” said Stephen Schork, the editor of The Schork Report in Pennsylvania.
European purchasing managers’ indexes (PMIs) yesterday suggested the euro zone is on course for a worse downturn in the current quarter. In China, the second-largest oil consumer, a survey covering services showed April’s growth was the weakest since August 2011.
The spread between Brent and West Texas Intermediate, a benchmark for US crude, narrowed to $8.18 in morning trading, its lowest since June of 2012, before widening back above $9.
Crude had risen earlier in yesterday’s session as Israeli air strikes around Damascus refocused attention on the potential for disruption to supply from the Middle East, source of about a third of the world’s oil.
“The attack over the weekend of Israel on Syria, on the one hand, can lead to some increased geopolitical premium,” said Olivier Jakob, oil analyst at Petromatrix in Switzerland.
At the same time, crude supply from Saudi Arabia, the region’s top exporter, to its domestic and export markets rose slightly in April to 9.2 million barrels per day, from 9.15 million b/d supplied in March, an industry source said yesterday.
Hedge funds and other large speculators increased their bets on higher Brent prices, upping their net long positions by 9,614 contracts to 108,741 in the week to April 30, according to data from the IntercontinentalExchange (ICE) released yesterday.
They also switched to a net short position of 7,135 contracts in gasoil, suggesting funds see prices in the Middle East and Asia falling in coming months.
Brent has gained as much as 9 percent in less than three weeks since reaching a 2013 low of $96.75 on April 18. Its high for the year is $119.17 reached on February 8.
Prices rallied on Friday in response to an upbeat US jobs report. Payrolls rose more than expected in April, pushing the unemployment rate to a four-year low of 7.5 percent, easing concerns about a sharp slowdown in the economy. The US nonetheless holds a record-high level of crude oil inventory, according to a government report released each tomorrow.
Morgan Stanley cited signs of a stronger physical market for Brent, such as a drop in expected Nigerian crude exports and supply of North Sea crude Ekofisk in June.
“Crude oil fundamentals continue to tighten, with supply disappointing yet again,” the bank said in a report yesterday. “The key risk remains weak demand.”
Reuters
