Brent touches one month high above $105 as Israel strikes Syria

Business & Markets 2013
Written by Reuters
Monday, 06 May 2013 12:47
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SEOUL/SINGAPORE (May 6): Brent futures rose to the highest in
nearly a month above $105 per barrel on Monday as an Israeli air strike
on a Syrian military facility over the weekend stoked supply disruption
worries from the Middle East.
Israeli officials said its second raid in days was aimed at stopping
Lebanon's Hezbollah, an ally of Iran, from acquiring weapons that could
be used to strike Tel Aviv if Israel follows through on threats to attack
Iranian nuclear facilities. Iran denied its missiles were destined for
Hezbollah and called on the region to unite against Israel.
Brent crude touched $105.49 a barrel, the highest since April 11, and
was up 84 cents at $105.03 at 0324 GMT. The contract extended
Friday's gains that after better-than-expected job growth was reported
in top oil consumer, the United States.
U.S. oil rose $1.11 to $96.72, after ending 1.7 percent up on Friday.
"Rising geopolitical worries have increased the risk premium on oil and the fear is that the Israeli attack is going to lead to a
wider involvement of other nations in the Syrian conflict," said Victor Shum, an oil consultant at IHS in Singapore. "That's
allowing oil to extend gains made on the back of strong jobs data in the United States."
U.S. payrolls rose more than expected in April, pushing the unemployment rate to a four-year low of 7.5 percent, easing
concerns about a sharp slowdown in the economy. A revision also showed hiring was much stronger than previously thought in
the prior two months, giving further relief to nervous investors.
The Dow and S&P 500 advanced to all-time closing highs on Friday as a result, and Asian shares and Shanghai copper
gained on Monday as investors were willing to take on more risks.
The upside for oil is still likely to be capped by lingering worries over demand growth as the global economic outlook remains
bleak amid ample supplies. Those twin factors may hold oil back from rising much from current levels and prompt investors to
take profits from the surge unless the situation in the Middle East worsens, Shum said.
LACKS TIGHTNESS
"The market today lacks physical tightness," said Shum. "So if you keep the latest geopolitical worries aside, there is no
reason for prices to be where they are. If the situation does not worsen, we may see investors take profit from the rise."
Brent has gained as much as 9 percent in less than three weeks since the intraday low of $96.75 a barrel for the year,
touched on April 18. It rose to a high of $119.17 on Jan. 2.
Weak economic data from the world's second-biggest oil consumer China and Europe's prolonged debt crisis have weighed
on prices.
China's export growth is expected to slow to around 10 percent in the second quarter from 18 percent in January-March, the
official China Securities Journal reported on Monday.
"Although the external environment facing China has improved, our country's strong export growth rate cannot be sustained as
demand is still not strong and trade protection rises," the paper quoted a report from the State Information Office.
That could signal further reason for investors to worry about China's energy and raw materials demand.
Brent looks exhausted and may retrace to $104.30, while U.S. oil may fall to $95.72, as it faces a resistance at $97.05,
according to Reuters technical analyst Wang Tao.