Brent crude rose above $111 a barrel on Monday as fears of disruption of supply from the Middle East resurfaced amid growing optimism over signs that the world's biggest economies are on their way to a steady recovery.
Brent breaches $111 on supply worries and prospects of economic recovery
Brent crude rose above US$111 a barrel on Monday as fears of disruption of supply from the Middle East resurfaced amid growing optimism over signs that the world's biggest economies are on their way to a steady recovery.
A plunge in oil exports from Iraq due to bad weather, a bomb attack on the convoy of its finance minister, escalating attacks in Syria and an exercise by Iran's navy in the strategic Strait of Hormuz have all revived supply fears. That has helped the market recoup some of the previous session's losses due to large shipments of European gasoline to the United States.
Front-month Brent gained 43 cents to $111.07 a barrel, after settling 1.1 per cent lower on Friday, the biggest loss since December 17 and below its 100-day moving average of $111.05.
US oil rose 63 cents to $94.19.
"If there is any supply side concern in the Middle East, it will reflect in the risk premium and support prices," said Ben Le Brun, market analyst at Sydney-based OptionsXpress. "Those concerns are offsetting the losses we saw in oil on Friday because of a fall in gasoline prices."
Gains in the US benchmark continued to exceed those of Brent, narrowing the price difference between the two contracts to the lowest since September.
The US contract is gaining on the European benchmark following news of the start-up of the expanded Seaway pipeline. The pipeline aims to ease the glut of crude in the US Midwest, especially at Cushing, Oklahoma, delivery point for the US futures contract.
Oil is also drawing support from the fall in the dollar. The euro climbed to the highest against the US currency since February 2012.
Bad weather cut oil exports from Iraq's Basra port to 960,000 barrels per day (bpd) on Sunday, down from 2.35 million bpd a day earlier, a shipping source said.
"High winds in the Gulf are preventing loaded ships from leaving the port on Sunday," the source said.