Brent rises above $108 on supply worries
Singapore, November 28, 2011
Brent crude rose more than $2 to stand above $108 a barrel on Monday as concerns of a supply disruption from the Middle East overshadowed worries about oil demand growth.
Markets got a boost earlier from a report suggesting the International Monetary Fund was preparing a 600-billion-euro rescue plan for Italy. Oil held on to gains even after the IMF said it was not in any discussion with Italian authorities on a financing plan due to a weaker dollar and supply worries.
Brent January crude was up $2.14 at $108.54 a barrel by 0854 GMT. US oil was also higher, boosted by a strong start to consumer spending ahead of the key year-end holiday season, with prices up $2.73 to $99.50.
"The potential geopolitical tension could send crude oil prices a lot higher in the very short term," said Benson Wang of Commodity Broking Services in Sydney. "There's a lot of geopolitical tension in the market," far more influential than the IMF deal, he added.
A report in Italian newspaper La Stampa suggesting the IMF was preparing a rescue plan worth up to 600 billion euros for Italy had earlier helped boost Asian shares, the euro and base metals.
"Just look at the risk markets across the board and we have seen some pretty strong inflows today," said Ben Le Brun, market analyst of OptionsXpress. "Looks like commodities across the boarder getting some good sentiment."
Iran's parliament voted on Sunday to reduce diplomatic relations with Britain, with one lawmaker warning that Iranians angered by London's latest sanctions could storm the British embassy as they did the US mission in 1979.
"Iran has downgraded their relationship with the UK and the market is looking at that area," said Wang of Commodity Broking Services in Sydney.
As for US consumer spending, a survey for the National Retail Federation, conducted by online research firm BIGresearch, showed shoppers spent a record $52.4 billion, up 16.4 percent from 2010, from Thursday through Sunday.
Fifty million Americans visited online retail sites on Black Friday, or an increase of 35 percent from a year ago, while online retail sales in the US on Black Friday jumped 26 percent this year, comScore data showed. - Reuters