Oil prices remain volatile as Middle East tensions rise

Oil prices jumped slightly from its lowest in two months on Thursday [2], as concerns grew that demand for crude will be disrupted as Middle East tension takes an upturn over Iran`s nuclear program and speculation rose that China will introduce new stimulus measures to boost growth.

NYMEX WTI Crude for November delivery was up 0.30 percent at $88.55 as of 07:29 GMT, compared with the opening level of $88.27, recording an intraday high of $88.75 and low of $87.90, off a two-month low of $87.70. ICE Brent crude rose 0.71 percent to $108.86.

Prices are actually not that far from a two-month low ahead of the hectic day for global economy, as central banks from China and Europe prepare to announce key rate decisions. The People`s Bank of China is expected to push on further monetary easing to counter economic slowdown.

Oil gains are strongly inspired by the ongoing turmoil in the Middle East and Iran [3] in particular, given the odds of military action between Israel and Iran, the world`s third-largest oil exporter, risking crude supplies, which could push prices back to stabilize above $90 a barrel.

The global slowdown is denting oil demand in China, where manufacturing contracted for two months in a row for the first time since 2009. Fitch Ratings lowered its 2012 growth forecast for China, expected to expand 7.8 percent this year

Oil markets [4] continue to face downside risks from the world`s leading economies. In the U.S., an inevitable fiscal cliff is looming as the Congress struggles to reach a budget deal risking a possible recession, as well as jobless rate lingering above 8 percent since more than three years.

In Europe, demand for crude has definitely slowed as investments fell with expectations the euro area economy is heading into a double-dip recession in the third quarter, as manufacturing and services shrank as a result of the debt turmoil and, high unemployment as well as austerity drive.

Uncertainty remains the main theme in Europe, and Spain, which takes the center of the three-year-old debt crisis, continue to shake market sentiment ahead of a possibly looming request for a sovereign bailout, easing the pressure on the government`s benchmark 10-year yields.

Meanwhile, markets are looking upon Spain to see whether the government will decide to tap the ECB`s new bond-buying plan, ahead of the awaited ECB monetary decision on Thursday. Recent reports showed the Spain is ready for a bailout but not as early as this weekend.

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