Oil gains nearly $3 on supply fears
London, December 20, 2011
Threats to supply in Iran and Kazakhstan and stronger economic data lifted oil by nearly $3 on Tuesday as concerns about the euro zone debt crisis faded into the background.
Brent crude was up $2.87 at $106.51 by 1503 GMT after the day's high of $106.79. It was on track for its best day since October 27 but was still down nearly 4 percent this month. US crude was up $2.80 at $96.68 a barrel.
Sacked oil workers in Kazakhstan demanded to know who ordered police to fire on protesters during clashes that killed at least 15 people in the Central Asian state's worst violence in decades. The country's crude production is estimated at around 1.6 million barrels per day, similar to Libya's before its civil war.
"Kazakhstan is important as it was hardly on the list before. It adds to supply worries and into the bullish market," said Andy Sommer, at GEL at Dietikon in Switzerland.
There were renewed concerns over supplies from Iran after the Opec member said crude production had dropped due to lack of investment in oil fields as the country faces the West's toughest ever sanctions over its nuclear program.
Traders and brokers were bullish on the prospects for the oil price in the run-up to the end of the year.
"Crude stocks are falling in the United States and there is reasonable economic growth there and there are the unknowns about potential cold weather and problems in Iran and Syria," said Christopher Bellew, an oil broker at Jefferies Bache.
"There's every reason to expect prices to move higher to year end and I'd expect to see (Brent) trading at $110 next week."
The Islamic Republic is also struggling with crude sales, with top buyer China slashing volumes of typical imports by about half for January as the two haggle over terms.
"It appears increasingly likely that Iran may need to turn to floating storage -- effectively reducing its near-term crude supply -- as it has at times in the past when it has had difficulty placing crude," JPMorgan analysts said in a report.
"Iran followed Saudi Arabia's lead in raising OSPs to record levels for January loadings, and given potential payment and political difficulties associated with purchasing Iranian crude, it is unsurprising that some buyers are searching for alternatives."
Market participants were also watching developments in OPEC producer Iraq after the departure of U.S. forces. Iraq issued an arrest warrant for Sunni Vice President Tareq al-Hashemi after the government obtained confessions linking him to what an official called terrorist activities.
Gains were capped by ongoing concerns that the euro zone debt crisis could tip the global economy into a recession. A plan to boost crisis funds parked with the IMF failed to reach a $200 billion hoped-for target. However, data from Germany showing rising business sentiment followed fresh signs of US economic growth accelerating with data on Monday pointing to a potential recovery in the beleaguered US housing market next year.
Ahead of weekly inventory reports, US crude stocks were expected to have fallen last week, with distillate stockpiles slightly lower and gasoline stockpiles up, a Reuters survey of analysts showed. - Reuters