Oil hits one-month high above $105 as Israel strikes Syria

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Oil rose above $105 a barrel on Monday to its highest in nearly a month as an Israeli air strike on a Syrian military facility refocused attention on Middle East supply risks, although prices pared gains after weak European economic data.

Israeli jets hit Syrian targets near Damascus on Sunday in an air raid that Western and Israeli officials called a new strike on Iranian missiles bound for Lebanon's Hezbollah. Iran denied the attack was on armaments for Lebanon and urged the region to unite against Israel.

Brent crude touched $105.49 a barrel, the highest since April 11, and was up 70 cents at $104.89 by 1030 GMT. U.S. oil rose to a high of $97.17 and traded up 72 cents at $96.33.

"Rising geopolitical worries have increased the risk premium on oil and the fear is that the Israeli attack is going to lead to a wider involvement of other nations in the Syrian conflict," said Victor Shum, an oil consultant at IHS in Singapore.

"That's allowing oil to extend gains made on the back of strong jobs data in the United States."

Countering the supply risks, surveys on Monday showed the euro zone's business downturn dragged on in April. The purchasing managers' indexes (PMIs) also showed Germany is now suffering a contraction in business activity that has long beset France, Italy and Spain.

"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.

"But the global PMIs are weak and that in itself is not really bullish for distillates because the economy is still not providing signs that a strong recovery is ahead. Global oil demand is driven by distillates."

WEAK DEMAND

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 Feb. 8.

Prices rallied on Friday in response to an upbeat U.S. 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.

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 on Monday. "The key risk remains weak demand."

Weak economic data from the world's second-biggest oil consumer, China, and Europe's prolonged debt crisis, have helped oil fall from its 2013 high near $120 a barrel.

The official China Securities Journal reported on Monday China's export growth was expected to slow to around 10 percent in the second quarter from 18 percent in the first. (Additional reporting by Meeyoung Cho in SEOUL and Manash Goswami in SINGAPORE; editing by James Jukwey)



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