Brent rises above $107 on econ recovery hopes
Brent crude futures rose above $107 on Wednesday, gaining for a third straight day, after upbeat US data pointed to a recovery in demand growth in the world's biggest oil consumer amid fears of a disruption in supplies.business Updated: Dec 21, 2011 14:20 IST
Brent crude futures rose above $107 on Wednesday, gaining for a third straight day, after upbeat US data pointed to a recovery in demand growth in the world's biggest oil consumer amid fears of a disruption in supplies.
Sentiment across financial markets got a boost on signs of easing stress in Europe after Spanish borrowing costs fell sharply, prompting gold, the euro and Asian stocks to rise.
Brent crude rose 57 cents to $107.30 a barrel by 0830 GMT, after posting the biggest one-day percentage rise since mid-October on Tuesday to settle up $3.09. U.S. crude gained 92 cents to $98.16 a barrel.
"There are two main things that are solid indicators of a revival in the United States. One is employment and the other housing," said Tony Nunan, a risk manager at Mitsubishi Corp.
"Added to that is the geopolitical uncertainty in the Middle East. You have Iran, you have Syria."
US housing starts and building permits jumped to a 1-1/2 year high in November as demand for rental apartments rose, suggesting the housing market was entering a tentative recovery.
Tuesday's data was the latest sign of a quickening of an economic recovery.
US stocks rallied nearly 3 percent, and most other commodity markets rebounded overnight.
"Last night's market action may have been somewhat of a catch-up rally based on the recent good data in the last few months," said Ben Le Brun, market analyst at OptionsXpress. "Regardless, we saw the energy, materials and financial sectors all rally strongly, a good lead for our market this morning."
On the other side of the Atlantic, hopes of Europe containing its debt crisis revived as German business sentiment rose sharply in December, defying expectations for a decline.
The rise underscored the strength of Europe's largest economy in the face of a sovereign debt crisis that has hammered growth in other euro zone members.
Short-term financing costs for euro zone struggler Spain more than halved on Tuesday as banks lapped up debt at an auction on Tuesday.
Crude stocks in the world's largest oil consumer the United States fell twice as much as expected, an industry report showed on Tuesday. The American Petroleum Institute said domestic stocks fell 4.6 million barrels compared with expectations of a drop of 2.3 million barrels.
A clearer picture on inventory levels will be available once the Energy Information Administration releases its numbers later in the day.
China's oil imports from top exporter Saudi Arabia in November rose 5.7 percent from October to 1.18 million barrels per day (bpd), but the 63,000 bpd rise was a fraction of the additional 600,000 bpd that the kingdom said it had produced in November.
Saudi Arabia said it pumped over 10 million bpd in November, its highest in decades, to meet strong consumer demand. But Asian refiners have shown little appetite for much more.
Oil investors are worried the escalating tension with Iran over the country's nuclear programme may disrupt oil supplies from the world's fifth-largest exporter.
Diplomats from the United States, the European Union and other allies agreed on Tuesday to step up pressure on Iran to force it to resume talks over its nuclear programme, an Italian diplomatic source said.
In addition to Iran, markets are also worried about supplies from Iraq. Iraqi authorities issued an arrest warrant for Sunni Muslim Vice-President Tareq al-Hashemi for suspected ties to assassinations and bombings, just as the United States announced plans to withdraw troops from the country.
"Look at Iraq. Within days of the US announcement to withdraw troops, there is concern about growing differences between the various factions," Nunan said.
First Published: Dec 21, 2011 09:34 IST