Oil over $124, violence flares in Mideast, Nigeria

By @ibtimes on

Oil rose above $124 a barrel on Monday, pushed higher by an escalation of violence in the oil-producing Middle East and post-election unrest in OPEC member Nigeria.

Brent gained 33 cents to $124.32 a barrel by 1134 GMT. U.S. crude rose 45 cents to $112.74.

Brent is again within sight of the peak above $127 a barrel, touched earlier this month, which was the highest since 2008 when the market reached its all-time high of nearly $150 before crashing down to less than $40.

Traders fear a long hot summer of discontent across the Middle East, Chris Weafer, chief strategist at Moscow's Uralsib investment bank, wrote in a note.

News of the spreading post-election violence in the north of Nigeria is also a price-supporting factor in the oil market.

This year's rally took off in earnest following the loss of production from OPEC member Libya, which was pumping around 1.6 million barrels per day (bpd) until the outbreak of violence, following a wave of popular unrest across the North African region.

Early on Monday, NATO forces flattened a building in Muammar Gaddafi's compound, while forces loyal to the Libyan leader have bombarded the western rebel stronghold of Misrata, rebels said.

Violence also racked Syria, a small non-OPEC oil producer.

Syrian security forces were reported to have killed hundreds in a crackdown on protests, while in top African oil producer Nigeria more than 500 people were killed in post-election violence, a human rights group said.

Oil market gains could be capped, however, by expectations high prices will begin to erode demand and limit economic growth.

A public holiday in many countries on Monday to mark Easter was also expected to curb trading volumes.

Leading exporter Saudi Arabia has said it has plenty of spare capacity that can be quickly added to the oil market if necessary, but its oil minister said it cut output in March because the market had plenty of oil.

The Organization of the Petroleum Exporting Countries next meets to formally reassess its output policy in June.

Delegates told Reuters on Monday they did not expect a formal change in supply policy at the meeting in Vienna on June 8.

TECHNICAL LEVELS, DOLLAR EFFECT

Apart from fundamentals of supply and demand, analysts said the market was technically strong and could draw strength from the weakness of the U.S. dollar, which makes dollar-denominated commodities relatively cheap.

Reuters market analyst Wang Tao said Brent's next target was the high touched earlier this month of $127.02 after it cleared resistance at $124.02.

The dollar in contrast hit another 29-year low against the Australian dollar.

Dollar weakness also supported other commodities, pushing gold to another record.

(Additional reporting by Florence Tan and Manash Goswami in Singapore; editing by Jason Neely)

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