Mideast tensions, Europe bailout keep Brent above $110
Brent crude stayed above $110 on Wednesday, holding onto its previous session gains, as Iran's escalating tensions with the West and an agreement by euro zone ministers to ramp up the firepower of their bailout fund helped support prices.
Brent crude slipped 32 cents to $110.50 by 0323 GMT, after revisiting the previous session's top of $111, which was its highest level in about two weeks. US crude eased 66 cents to $99.21 a barrel. It had risen $1.58 on Tuesday to settle at $99.79 a barrel.
US crude prices were weighed down by data showing inventories had risen 3.4 million barrels in the week to November 25, compared with analysts' expectations for a 200,000-barrel fall, traders said. "Overall sentiment in the market remains bullish even though oil futures edged down this morning," said Victor Shum of energy consulting firm Purvin & Gertz. "Concerns over the Euro zone debt crisis persist, but the governments of the various key euro zone members are slowly getting their act together to manage the crisis," he added.
Prices are likely to remain strong due to fears about supply disruptions due to unrest in the Middle East, traders said. Protesters from Iran - the world's fifth largest oil exporter - stormed two British diplomatic compounds in Tehran on Tuesday in protest against new sanctions imposed by London.
In Syria, pressure is mounting on President Bashar al-Assad, with growing foreign condemnation of his repression of the Syrian uprising and attacks by armed rebels that his forces appear unable to stamp out. "We are seeing the tensions in the Middle East bubbling again, not just with Iran but also growing trouble in Syria. Although Syria is not a major oil exporter, it is all about unrest in the Middle East," Shum added.
On Tuesday, European officials agreed to strengthen a bailout fund and seek more aid from the International Monetary Fund to help lend to troubled economies, which helped nudge up Asian shares and the euro on Wednesday. Crude prices were also supported by Sudan's decision to halt oil exports from Southern Sudan over a transit fee row. The South's oil minister said on Tuesday the spat would hurt both countries' oil interests.
South Sudan seceded from Sudan on July 9, taking about three-quarters of the formerly united country's roughly 500,000 barrels per day (bpd) of oil output.
China, the world's second largest oil consumer, is a major buyer from both countries and has urged them to resolve the dispute. "We know stocks of crude are tight, and therefore physical disruptions tend to have a greater weight than potential disruptions," J P Morgan said in a daily note which highlighted that Sudan, and not Iran, was supporting the Brent structure.
The volume of lost exports to South Sudan's government is reported as 200,000 barrels per day (bpd), with a further 150,000 bpd of joint venture production not directly affected, it added.