Crude Rises Sharply On Geopolitical Worries
Oil futures jumped Monday, touching $100 a barrel for the first time in more than a week, lifted by unrest in Syria and the prospect of additional sanctions against Iran.
Light, sweet crude for January delivery settled up $1.44, or 1.5%, at $98.21 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe recently traded up $2.28, or 2.1%, to $108.68 a barrel.
Nymex traded in a wide range but remained firmly planted in positive territory Monday, with Nymex crude touching an intraday high of $100.74 a barrel. That marked the contract's first foray into triple-digit territory since Nov. 18, though the rally cooled as the trading day went on.
Futures ended the day higher following news of geopolitical unrest on several fronts. The European Union signaled it will recommend additional sanctions on Iran, including a possible oil-import ban, during a meeting of foreign ministers set for Thursday in Brussels.
Meanwhile, the Arab League on Sunday approved economic sanctions on Syria as punishment for the regime's crackdown on protesters.
"This unrest in Syria, possible sanctions against Iran--it's potentially bullish stuff," said Peter Donovan, vice president at Vantage Trading, an oil options brokerage in New York.
Iran exported 2.2 million barrels of oil a day last year, according to the U.S. Energy Information Administration, making it the world's third-largest oil exporter. The EU as a whole was the second-biggest recipient of that oil.
Although Syria itself isn't a major oil producer, the scale of the uprising has fed concern that the popular unrest in the region could spread to major oil producers like Saudi Arabia.
Any further disruptions to oil supplies would come at a challenging time for the crude-oil market. Europe has been suffering from exceptionally tight oil inventories ever since Libya fell into civil war in February. Oil inventories in the U.S., meanwhile, have been falling steadily for the last several months, in part to make up for Europe's shortfall.
"The timing of such an [Iranian] embargo could hardly be worse," said James Zhang, commodity strategist at Standard Bank in London.
The strong rally in the market for Brent crude, the European benchmark, underscores the concern about the tight market there, Donovan said.
"Inventories there are much tighter than we are here," he said.
Separately, crude futures also were underpinned by indications that the euro zone could be nearing a solution to its sovereign-debt crisis. Euro-zone leaders were said to be negotiating a fiscal pact aimed at preventing the currency bloc from disintegrating by tying its members closer together, according to The Wall Street Journal.
The deal has yet to be finalized, but markets across the board were bolstered by the news. Most commodities were higher, while the Dow Jones Industrial Average recently was up 2.3% to 11494.
Front-month December reformulated gasoline blendstock, or RBOB, settled up 6.92 cents, or 2.8%, to $2.5181 a gallon. December heating oil settled up 4.26 cents, or 1.5%, to $2.9699 a gallon.
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