Brent rebounds on Bahrain, Japan nuclear crisis

By @ibtimes on

Brent crude by as much as $2 to over $110.50 a barrel on Wednesday, rebounding from a three-week low near the start of the session as clashes in the Middle East continued and the Japanese nuclear crisis worsened.

Bahraini security forces cracked down on protesters on Wednesday, firing teargas they cleared demonstrators from a central roundabout that had become the symbol of an uprising by the island's Shi'ite Muslim majority.

In Japan, workers withdrew briefly from a stricken nuclear power plant because of surging radiation levels, but efforts to avert a catastrophic meltdown quickly resumed. Nuclear experts said the solutions being proposed amounted to last-ditch efforts to stem what could become one of the world's worst industrial disasters.

Brent for April was up $1.62 to $110.14 a barrel by 0905 GMT (5:05 a.m. ET), rebounding from a near three-week low of $107.35. U.S. crude futures were up $1.23 at $98.41 a barrel around the same time.

It remains unclear whether the earthquake in Japan will ultimately result in an increase or decrease in oil demand, said Christopher Bellew, an oil trader at Bache Commodities in London.

Oil prices have yet to benefit from an expected increase in Japanese demand for gasoil and fuel oil for power generation to replace some of the nuclear capacity lost following Friday's earthquake and tsunami.

Oil shipments to Japan have not been significantly affected by the earthquake and subsequent nuclear crisis, a top shipping industry group said on Wednesday.

Earlier, U.S. crude oil futures were supported by a smaller-than-expected 91,000 barrel stockbuild at the Cushing storage hub, data released by the American Petroleum Institute (API) showed late on Tuesday.

Analysts polled by Reuters had, on average, expected a 1.8-million-barrel build.

A U.S. Energy Information Administration report due at 1430 GMT on Wednesday is forecast to show higher crude inventories on increased imports, while gasoline stocks are expected to fall 1.8 million barrels. Distillate supplies (which include heating oil and diesel) are expected to have dropped 1.3 million barrels according to the poll.

ALL EYES ON BAHRAIN

Bahrain's king declared martial law on Tuesday as his government struggled to quell an uprising by the island's Shi'ite Muslim majority that has drawn in troops from fellow Sunni-ruled neighbor Saudi Arabia.

The island state lies less than 100 kilometers from the hub of the Saudi oil industry around Dhahran, including the world's largest oil fields, terminals and processing facilities.

The Middle East tension that is coming from Bahrain is a positive factor for the oil market, said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage.

In Libya, Muammar Gaddafi's government forces pushed eastwards toward the rebel stronghold of Benghazi and his government predicted victory within days while world powers debated imposing a no-fly zone to help stop him.

Libya's oil output, normally about 1.6 million barrels per day and down by at least two-thirds, will take some time to return to normal, the head of the National Oil Corporation said on Tuesday, because some installations have been damaged in fighting between rebel and government forces.

(Additional reporting by Alejandro Barbajosa; editing by Jason Neely)

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