Oil rises near $110 on Mideast concerns

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Brent crude oil rose almost $2 per barrel on Thursday after skirmishes along the Turkey-Syria border raised fresh concerns over the security of Middle Eastern oil supplies.

Turkey's military hit targets inside Syria for the second day on Thursday after a mortar bomb fired from Syrian territory killed five Turkish civilians, marking the most serious cross-border escalation of the 18-month-old uprising in Syria.

The Turkish parliament gave authorisation for military operations outside the country if the government deemed them necessary, but Deputy Prime Minister Besir Atalay stressed this did not amount to a declaration of war.

Traders said the violence raised concerns about the stability of the whole of the Middle East at a time when Iran is at loggerheads with Israel and the West over its nuclear programme and both sides have threatened military action.

Brent crude for November rose to a high of $110.13, up $1.96, before returning to around $109.30 by 1340 GMT. The contract fell to an intra-day floor of $107.67 on Wednesday, the lowest since Sept. 20.

U.S. light crude oil for November rose 60 cents to $88.74 a barrel, after dropping to its lowest since Aug. 3 in the previous session.

"The hostilities between Syria and Turkey reinforce supply fears, as a number of pipelines cross the region," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

"We therefore envisage prices recovering provided that the general market environment does not deteriorate."

"OVERSOLD"

On Wednesday, Brent dropped 3 percent and U.S. crude fell 4 percent as fears a delayed recovery in China and recession in the euro zone would limit energy demand, but futures began to recover during Thursday's session.

"It (the market) was oversold and then ratcheted up by tensions between Turkey and Syria," said Christopher Bellew, a broker at Jefferies Bache. "It was quite a steep fall, so it could go back up to levels we saw two days ago."

Adding to the tensions is social unrest in Iran over the weakening currency, another blow to citizens already reeling under the impact of sanctions.

Spot gold shot to its highest since last November on Thursday, boosted by a stronger euro after the European Central Bank elected to keep its benchmark rate on hold at ultra-low levels.

Stock markets and the euro rallied ahead of U.S. jobs figures on Friday that were expected to show the world's biggest economy recovering slowly. Jobs numbers from the U.S. Labor Department are expected to show a slight improvement from the previous month. (Additional reporting by Ramya Venugopal in Singapore; Editing by Christopher Johnson and William Hardy)



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