* Brent bounces from 2-week low, softer dollar helps
* Supply risks from Middle East tensions remain
* Brent may recover towards $120 between now and Christmas
-analyst
(Updates prices)
By Manolo Serapio Jr
SINGAPORE, Oct 22 (Reuters) – Brent crude edged up towards
$111 a barrel on Monday after a four-day decline spurred by
worries over a fragile global economy, with supply risks
supporting prices as violence in the Middle East intensified.
Brent lost 4 percent last week and may stretch losses to a
second straight month in October amid global economic
uncertainty. But growing violence in parts of the Middle East,
which supplies a third of the world’s oil, has helped counter
concerns over weaker fuel demand.
Also supporting oil prices, along with a softer dollar
versus the euro, are delays in the restart of both a major
Canadian crude oil pipeline to the United States and the North
Sea Buzzard oilfield.
Brent crude for December delivery had risen 0.5
percent to $110.61 per barrel by 0631 GMT, recovering from a
session low of $109.47, its weakest since Oct. 4.
U.S. oil was up 0.4 percent at $90.47, also bouncing
back from an intraday trough of $89.49.
Brent crude’s premium to West Texas Intermediate futures
, measured between December contracts, narrowed to
around $20 from more than $24 last week, the widest in a year.
“We continue to have the same push and pull factors. The
demand outlook remains weak, but geopolitics remains the wild
card,” said Victor Shum, managing director for downstream energy
consulting at IHS Purvin and Gertz.
Investors were also buying back oil after prices fell over
the past four sessions, said Ken Hasegawa, commodity sales
manager with Newedge in Tokyo.
Shum and Hasegawa agreed that weaker demand prospects should
weigh on prices over the next two months given that top exporter
Saudi Arabia has made good on its pledges to keep the oil market
well supplied.
“There’s no shortage at the moment. From a fundamental point
of view, Brent should soften to around $100,” said Hasegawa.
While recent employment and housing data from top oil user
the United States have been relatively upbeat, the economy of
No. 2 oil consumer China is, at best, on a tepid road to
recovery, while Europe remains mired in a nagging debt crisis.
The Chinese economy could stage a feeble rebound in the
fourth quarter on higher public infrastructure spending,
although growth will remain lethargic through 2013, a Reuters
poll of economists showed.
SYRIA DISTRESS
Tensions surrounding Syria continued to put oil investors on
edge and support prices, with fears that the violence could
spread to other nations in the Middle East.
The state funeral in Beirut of an assassinated Lebanese
intelligence chief ended in violence on Sunday as angry mourners
broke away and tried to storm the offices of Prime Minister
Najib Mikati, feeding into a growing political crisis in Lebanon
linked to the civil war in neighbouring Syria.
The Middle East tensions, along with the possibility that
China could apply some stimulus to boost its economy, may help
oil prices rebound between now and the end of the year, said Ben
Le Brun, market analyst at OptionsXpress in Sydney.
“I think those are going to be factors that largely should
support oil prices going into Christmas. I’m looking for a trend
up towards $120 for Brent and $100 for WTI,” said Le Brun, also
citing the positive impact of the ongoing bond-buying programme
by the Federal Reserve to boost liquidity.
(Editing by Richard Pullin and Joseph Radford)
