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Crude Oil Rises as Israeli Attacks on Gaza Roil Middle East |
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administrator |
DATE |
2008-12-30 07:50:42 |
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Crude Oil Rises as Israeli Attacks on Gaza Roil Middle East
By Margot Habiby, December 29, 2008
Crude oil rose above $40 a barrel after Israeli air strikes in the Gaza Strip raised concern that supply from the Middle East, the world’s largest producing region, may be disrupted.
Futures climbed as Defense Minister Ehud Barak said Israel is fighting a “war to the death” with Hamas, the Islamist group that controls Gaza. Israel massed tanks near the Gaza Strip and started calling up thousands of army reservists. Hamas’s backer, Iran, holds the world’s second-largest oil reserves.
“Any Iranian escalation or more visible Iranian involvement would push the price higher,” said David Pursell, managing director at Tudor, Pickering, Holt & Co., a Houston-based energy investment banker.
Crude oil for February delivery rose $2.31, or 6.1 percent, to settle at $40.02 a barrel at 2:47 p.m. on the New York Mercantile Exchange. Earlier, it touched $42.20 a barrel in the biggest gain in two weeks. Futures have declined 73 percent from a record $147.27 a barrel in July.
Hamas, the militant Islamist group that seized control of Gaza last year, is considered a terrorist organization by the United States.
Prices also advanced as China, the world’s second-biggest energy consumer, said it will supplement its emergency oil stockpiles while prices are low, while Libya and the United Arab Emirates announced compliance with OPEC output cuts agreed on this month.
“China’s plans to stockpile crude may take up some slack from the demand destruction from the economic slowdown,” said Rob Laughlin, a senior broker with MF Global Ltd. in London.
Trading Volume
Volume in electronic trading on the exchange was 217,867 contracts, as of 4:02 p.m. in New York. Volume totaled 96,658 contracts on Dec. 26, down 80 percent from the average over the past three months. It was the first day this year to have volume of less than 100,000 contracts.
U.S. fuel consumption fell 4.2 percent to 19.8 million barrels a day in the four weeks ended Dec. 19 from the year earlier, according to an Energy Department report on Dec. 24. The U.S. is the world’s largest energy consumer. Gasoline demand was down 2.7 percent in the same period, while distillate demand fell 5.1 percent and jet fuel 12 percent.
Global consumption will shrink by 200,000 barrels a day in 2008, contracting for the first time since 1983, according to a Dec. 11 report by the International Energy Agency, an adviser to 28 nations.
“Unless there’s more to it, ultimately what matters is we’ve got to get the global economy back to normal before you can count on sustainably higher oil prices,” Pursell said.
Futures prices fell 11 percent last week and touched a four-year low of $32.40 on Dec. 19.
Dollar’s Decline
Crude was supported today as the U.S. dollar lost more than 2 percent against the euro, its biggest decline in more than a week, bolstering the appeal of dollar-priced assets used to hedge against inflation such as gold and oil. The U.S. currency traded at $1.4049 a euro at 3:27 p.m. in New York. Earlier, it touched $1.4364 a euro.
Gold prices rose to the highest in 11 weeks as the escalating tensions in the Middle East increased demand for the metal as a haven. Silver and platinum also gained.
Abu Dhabi National Oil Co., the United Arab Emirates state- owned producer, will reduce crude-oil exports in January and February after OPEC agreed to lower output as of Jan. 1. Libya is asking companies to cut by 270,000 barrels a day from that date, oil official Shokri Ghanem said in a telephone interview today.
OPEC Cut
The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, agreed on Dec. 17 to trim daily production targets by 2.46 million barrels next month.
“There’s an expectation now that we’ll see better compliance among OPEC countries than normal, better than people had expected,” said Olivier Jakob, managing director of Zug, Switzerland-based Petromatrix. “It’s a given that the Saudis will comply.”
Chinese companies will be encouraged to utilize spare oil- storage capacity while state and commercial reserves of other “strategic resources” will be set up, Zhang Guobao, head of the National Energy Administration and the vice chairman of the National Development and Reform Commission, wrote in an article in the official People’s Daily today.
The Israeli air strikes, launched to halt rocket attacks by Islamic militants after a six-month truce with Hamas ended Dec. 19, killed at least 313 people and injured 1,400, prompting protests across the region from Saudi Arabia to Syria.
Israeli Preparations
Israeli tanks and armored personnel carriers began taking up positions outside the perimeter fence of the Gaza Strip, Israel Radio said. The army refused to comment on the report.
Oil prices soared to a then-record $78.40 a barrel in July 2006 after Israel attacked Iranian-backed Hezbollah forces in Lebanon. At the time, Iran, the fourth-largest oil producer, was facing international sanctions over its nuclear program, while pipeline attacks had also cut output in Nigeria.
Brent crude oil for February settlement rose $2.18, or 5.7 percent, to $40.55 a barrel on London’s ICE Futures Europe exchange. Earlier, it rose as much as 13 percent.
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