Oil Futures Rise on Middle East, Housing Prices
Crude futures ended Wednesday 2.7% higher after concerns about Middle Eastern stability returned to the forefront, along with a solid report on U.S. housing prices.
Crude futures settled up $2.37 to $90.98 per barrel, the highest settling price since Oct. 18. Brent futures gained $2.27 per barrel to $111.07. Low trading volumes are accentuating price movements, analysts said.
Security forces in the United Arab Emirates arrested UAE and Saudi Arabian citizens who were allegedly planning to carry out terrorist attacks in the region.
Besides the UAE arrests, traders were watching Iran, which is resuming naval exercises near the Straits of Hormuz, through which a sizeable portion of the world's oil supply is transported. The Gulf Cooperation Council, which represents six countries in the region, is forming a unified military command to deal with the threat from Iran's nuclear program.
"It looks like things are heating up there," said Andy Lebow, a trader and broker for Jefferies Bache. "I think the geopolitical situation in January and February will be a major consideration for this market."
Jim Ritterbusch, head of trading-adviser Ritterbusch and Associates, said in a note that the rally also appeared to coincide the release of the Case-Shiller home price index. The index showed that on a seasonally adjusted basis, housing prices rose across 10 major metropolitan areas and a 20-city index by 0.6% and 0.7%.
Tight inventories of U.S. gasoline and home heating oil have left the oil markets primed for any reason to justify an upside rally, Mr. Ritterbusch said. "The oil complex remains highly sensitized to even the slightest tidbit of bullish macro news," Mr. Ritterbusch said.
Mr. Ritterbusch said oil prices could still gain $2 more before the end of the year.
Another factor in Wednesday's rise in prices was news that the Kurdish government in Iraq had reduced output of shipments of oil to Turkey. Turkish Energy Minister Taner Yildiz said output from northern Iraq fell to about 350,000 barrels a day from about 450,000 barrels, according to Bloomberg.
Earlier this week, the central government in Baghdad said it was suspending some $296.6 million in payments to Kurdistan after accusing the latter of failing to honor its export commitments.
The dispute points to an "actual reduction of supply," said Price Futures Group analyst Phil Flynn. "And it raises the larger issue of where do we go from here?"
Besides the Middle East issues, analysts said crude-oil futures received a boost from reports that President Obama was cutting short his Hawaii vacation to resume talks over the fiscal cliff. A deal with House Republicans would support oil prices by removing uncertainty that has clouded financial markets.
Front-month reformulated gasoline blendstock, or RBOB, settled at $2.816 a gallon, up 6.5 cents. Heating oil settled $3.051 a gallon, up 4.9 cents.
Copyright (c) 2013 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