Oil firmer over $110 on Middle East concern

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Brent crude oil rose further over $110 per barrel on Monday as fighting in Beirut and Gaza intensified fears of widening conflict and the security of fuel supplies from the Middle East, helping stem a four-day decline in prices.

Brent lost 4 percent last week on global economic uncertainty. But growing violence in parts of the Middle East, which supplies a third of the world's oil, has helped counter concerns over weaker fuel demand.

Brent crude for December delivery rose 49 cents to $110.63 per barrel by 1325 GMT, recovering from a session low of $109.47, its weakest since Oct. 4.

U.S. oil was down 9 cents at $89.96, after touching an intraday trough of $89.49.

Gunmen exchanged fire in Lebanon's capital on Monday, wounding five people, while protesters blocked roads with burning tyres following the assassination of a security official last week. Many politicians have accused Syria of being behind the killing.

"Lebanon has now become a new seat of unrest," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

The crisis in Lebanon underscores concerns that the 19-month-old uprising against President Bashar al-Assad is dragging in Syria's neighbours. Violence spilled over the Turkey-Syria border earlier this month, sparking worries among investors over the security of oil supply in the area.

"(The tensions) destabilise the whole region and therefore have an impact on oil transportation, especially the oil from northern Iraq, which is transported through pipelines over the crisis region," Fritsch said.

Israeli forces killed two Palestinian militants during an incursion in the northern Gaza Strip on Monday that touched off clashes with gunmen from the governing Hamas movement, local officials said.

Fritsch said investors were buying back oil after prices had fallen for four consecutive sessions, also supporting prices.

Speculators increased their net long positions in both Brent crude and gasoil futures and options for a third straight week, data published by the IntercontinentalExchange (ICE) showed on Monday.

But political tensions played out against a weak global economic backdrop that weighed down other commodities on Monday and limited gains in oil.

London copper touched a one-month low, following other financial markets after a bigger-than-expected fall in Japan's exports dented appetite for riskier assets.

The Chinese economy could stage a rebound in the fourth quarter on higher public infrastructure spending, although growth will remain lethargic through 2013, a Reuters poll of economists showed. (Additional reporting by Manolo Serapio Jr in Singapore; Editing by William Hardy)



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