Crude-oil prices rose Tuesday afternoon as traders overlooked forecasts of economic weakness and focused on burgeoning tensions in the Middle East.
Light sweet crude for November delivery on the New York Mercantile Exchange jumped $3.06, or 3.4%, to $92.39 a barrel. Brent oil futures were $2.49, or 2.2%, higher at $114.31 a barrel.
Anxiety about the Middle East centered on several possible scenarios, fueling talk that oil prices could soar above $100 a barrel if tensions continue to worsen.
"The whole [Middle Eastern] region is a mess right now," said Phil Flynn, an analyst with the Price Futures Group in Chicago. "There's a lot of fear in the market place."
Rising tension between Syria and Turkey has generated speculation that 400,000 barrels a day of oil shipped to Turkey from Iraq's northern Kurdistan region could be at risk in a border skirmish. Also on the market's mind: the possibility that Iran could support Syria against Turkey in such a dispute, market participants said.
Pressure on Iran to back off its nuclear program is also spooking markets. A call by Israeli Prime Minister Benjamin Nethanyahu to set up early elections in Israeli has been seen as "a referendum on war" between Israel and Iran, Mr. Flynn said.
"Iranian rumors of growing tensions are spooking this market," said Carl Larry, head of trading adviser Oil Outlooks and Opinions.
Rising concerns about the Middle East overwhelmed some other headlines that would normally embolden oil bears. A new report from the International Monetary Fund warned that the chance of a global economic slowdown is "alarmingly high." The IMF on Tuesday cut its global growth forecast for this year to 3.3% and to 3.6% in 2013. That is down from its July expectations of 3.5% growth in 2012 and 3.9% next year.
On Tuesday, Saudi oil minister Ali al-Naimi reiterated his support for more moderate oil prices.
Saudi Arabia is likely to continue to pump around 10 million barrels a day of crude this month, if customer demand requires, Mr. Naimi said, repeating calls for moderating prices to near $100 a barrel for Brent crude oil. "We would like to see the price moderating...we would like to see it lower toward $100," Mr. Naimi told reporters in Riyadh.
Yet oil markets instead focused on Middle Eastern tensions, and the pallid supply picture in some key markets. Oil companies have delayed some loadings and pushed back maintenance on some North Sea fields that are influential in setting Brent prices, said analyst Stephen Schork. Traders are aware as well that gasoline supplies in the U.S. are tight.
"With the combination of what we're seeing, I think we could make a run back up to the mid-90s. And if you break out there, we're back up to $100," said Mr. Schork.
But not everyone is convinced Tuesday's rally will last for long. Tariq Zahir, managing member of Tyche Capital Advisors, predicted the strength in prices would be "short-lived" unless there is an actual event that backs up the anxiety about the Middle East. Mr. Zahir sees the strengthening dollar as a drag on oil prices.
There is "a little bit of fear, but it won't be sustained," Mr. Zahir said.
Copyright (c) 2012 Dow Jones & Company, Inc.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
More from this Author
Most Popular Articles
From the Career Center
Jobs that may interest you