Brent rose above $110 a barrel today, buoyed by upbeat business surveys that suggested the global economy is on the mend and kindled hopes for higher fuel demand.
Manufacturing activity in the United States and China rose to multi-month highs while growth in the euro zone was better than expected, pointing to a potential uptick in world oil consumption.
“We’ve got a much better global demand outlook and that’s the medium- to long-term driver for oil prices,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
Brent crude for October rose 37 cents to $110.27 a barrel by 0508 GMT, although it is likely to stay flat this week after a 2 per cent gain last week.
US crude edged up 13 cents to $105.16, but remained on track for a 2 per cent drop this week on signs that companies are actively diverting oil to the contract’s delivery point Cushing, Oklahoma.
The positive global economic data combined with geopolitical tensions in the Middle East boosted oil prices. Traders continued to keep a close watch on the situation in Egypt and the status of exports from Libya’s key ports.
The political crisis in Egypt has stoked supply worries as the country is home to the Suez Canal and the Sumed pipeline, which together carry around 4.5 million barrels per day of oil between the Red Sea and the Mediterranean.
The Egyptian army has said it will guarantee the safety of the canal and pipeline but any disruption would have a major impact on oil prices.
In Libya, its largest crude oil export terminal Es Sider and the oil port of Zueitina remain closed, deputy oil minister Omar Shakmak said, although some improvement was seen at other ports.
The outages have slashed output and shipments and are the worst disruption to Libya’s oil sector since the 2011 civil war.
“The risk for oil is only in the upside,”Mr McCarthy said.
“The potential to push prices higher will come from supply,” he said, referring to the approach of the peak period of the US hurricane season.
Atlantic hurricanes that stray into the Gulf of Mexico - which accounts for nearly a quarter of US crude output - often disrupt oil production and shipping.
Investors are still watching the impact on markets of any tapering of the US Federal Reserve’s economic stimulus, that could start next month.
“We continue to monitor the employment situation in the US closely as this may change the pace of asset purchase tapering by the US Federal Reserve,” said Teoh Say Hwa, head of investments at Philip Futures in Singapore, adding that tighter liquidity could weigh on commodity prices. (Reuters)
