The price of oil rose Monday as markets nervously watched the first day of a critical summit in Sharm el-Sheikh trying to halt more than two weeks of bloodshed in the Middle East.
The benchmark Brent North Sea crude oil for November climbed to 32.97 dollars before settling at 32.65 dollars, still up from 32.52 dollars at the close on Friday.
Earlier in the day it had dipped below 32.00 dollars.
Prices were volatile amid concern that oil-producing Gulf Arab states might be drawn into the Israeli-Palestinian stand-off and withhold supplies in support of the Palestinians.
A warning from the world's biggest producer Saudi Arabia last week that Gulf Arab states would not stand by while Israel made "the slightest intolerable step" against the Palestinians haunted the market.
Oil futures surged by around nine percent to 10-year highs above 35 dollars a barrel on Thursday after an attack on a US destroyer in the Gulf sent the market into a frenzy amid concern that the Middle East conflict was poised to spread.
The sight of Israeli rocket attacks on Palestinian targets on Thursday drove prices higher still, with fears of all-out war in the Middle East growing.
But prices fell back sharply on Friday as Palestinian leaders indicated they were ready to join the proposed summit in Egypt.
"It was a very severe sell-off on Friday night and it appeared that it was followed through over the weekend," said Prudential Bache analyst Christopher Bellew.
"But from the first moment early this morning prices began to strengthen, although we opened lower."
Prices bounced back on Monday morning, Bellew said, in a movement "very much based on the uncertainty surrounding these peace talks."
The market was watching the summit in Sharm el-Sheikh closely for any signs of progress towards a return to peace in the Middle East. Analysts said the talks would be the key factor influencing prices in the coming days.
If the talks appeared to be making progress towards a restart of the peace process then prices would slip again, Bellew said. "If the talks appear not to be successful and the tension increases again, then we'll see them (prices) moving higher," he said.
The market shrugged at news that workers at the Venezuelan state oil company Petroleos de Venezuela (PDVSA) had signed an agreement over the weekend ending their three-day strike, which GNI analyst Lawrence Eagles said had been "overshadowed" by the Middle East conflict.
News on Saturday that the United States had begun pumping oil from its strategic reserve for release to international buyers three weeks ahead of schedule also did little to sway market sentiment.
Beyond the Middle East conflict, the shortage of crude oil stocks that caused oil prices to spike to 10-year highs in September remained.
One oil analyst here who preferred to remain anonymous said: "The oil price depends very much on the Middle East situation in the short term, but in the long term it depends on oil stocks, and they are still quite drawn down, so that should support prices in the longer term."--AFP
© 2000 Mena Report (www.menareport.com)