Oil rises on Middle East fears

By @ibtimes on

Oil prices advanced on Monday as protests in Oman raised concerns about supply from the Middle East, though world stocks rose and were on track to post their third straight month of gains on an improving growth outlook. Copper prices extended the previous session's 3 percent gains after an earthquake in top producer Chile, though benchmark U.S. 10-year Treasuries were also in demand, sending yields to below 3.40 percent -- their lowest in four weeks. The dollar hovered near its three-week low against a basket of major currencies.

Omani protesters demanding political reforms blocked roads leading to a main export port and refinery on Monday as the death toll from Sunday clashes with police in the Gulf Arab sultanate rose to six. However, its oil flow has not been affected.

Revolt in Libya has cut as much as three quarters of the OPEC member's output, prompting Saudi Arabia to step in and plug the supply gap to Libya's oil buyers.

However, oil prices stayed firm, with Brent crude up 1.2 percent to trade above $113.56 a barrel and U.S. crude futures rising 1.2 percent to above $99 a barrel.

There is the continued threat that conflicts will spread in the region that produces a large amount of oil in the world, said Ben Westmore, a commodities economist at the National Australia Bank.

There's been a bit of a contagion already, he said.

The worst-case scenario for oil markets would be an interruption to supply from Saudi Arabia. It holds most of the world's spare crude output capacity, and without it there is no producer that could fill supply disruption such as that stemming from Libya.

Brent crude is up more than 12 percent this month, heading toward its sixth straight month of rises.

The higher oil price could derail global growth, though Monday's rise was not as dramatic as last week when Brent crude neared $120 a barrel, a 29-month high.

World equities measured by MSCI All-Country World Index <.MIWD00000PUS> added 0.1 percent after rising 1.1 percent on Friday. The global index is up 2.1 percent this month, on track for a third straight monthly rise.

Europe's FTSEurofirst 300 <.FTEU3> index fell 0.3 percent, partly hurt by results from HSBC , while Ireland's stocks <.ISEQ> dropped 0.3 percent.

Ireland's main opposition party said it would start urgent talks on forming a new government in a bid to turn its landslide election win into a mandate to renegotiate a bailout deal with Europe.

In Asia, Japan's Nikkei average <.N225> rose 0.9 percent, helped by a weaker yen.

TREASURY YIELDS DOWN

A growing aversion to risky assets in the latest week fueled the biggest flows to global bond funds in more three months, and turned more investors away from emerging market stocks, according to fund tracker EPFR Global. [ID:nN25262438] Yields on benchmark 10-year U.S. Treasuries eased 2 basis points to 3.3941 percent. The greenback also slipped, down 0.2 percent and hovering near its three-week low against a basket of major currencies <.DXY>.

Rising oil prices help to widen the perceived policy divergence between the Fed and other major central banks, said Lee Hardman, currency analyst at BTM-UFJ.

The ECB sees rising crude as an upside risk to inflation rather than the Fed's view that it will be negative for growth. This is increasing the risks of a near-term overshoot for the euro.

Copper rose for the third day, up 0.7 percent this month and on track for its eighth month of gains.

(Additional reporting by Neal Armstrong in London, Florence Tan in Singapore; Editing by Ruth Pitchford)

Join the Discussion