SINGAPORE (Reuters) - Brent crude rose close to $106 on Thursday to hit a 7-week high, fuelled by MidEast tension, while comments by the U.S. Federal Reserve downplaying the risk of a double-dip recession in the world’s biggest economy renewed hopes of oil demand recovery.
Fed chief Ben Bernanke’s comments helped improve sentiment across financial markets by alleviating fears the global economy might deteriorate further. But oil supply worries were stoked by a deadly bombing in Syria and an attack on Israeli tourists in Bulgaria that plunged the Middle East deeper into crisis.
Brent crude gained for a seventh straight day, rising to $106.01, its highest since May 30. By 2.12 a.m. EDT, it was up 81 cents at $105.97 a barrel. U.S. oil gained 76 cents to $90.62 and also touched a seven-week high.
“U.S. crude rising above $90 implies that overall sentiment is turning positive,” said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments. “They touched their lows in June and are turning around. Tension between Iran and the West are also substantial factors.”
Brent has gained 20 percent from the lows touched in June. The contract had slumped since the year’s high of more than $128 in March, weighed down by worries that demand growth would slow further as a debt crisis in Europe threatened to engulf the United States and emerging economies.
Sentiment has improved this month on investor optimism the worst may be over for the global economy.
“A firmer tone of macroeconomic data flow, the lack of any substantial weakening in global oil data, plus the lack of any obvious prompt surplus in physical markets have all combined to help accentuate the positive in the market,” analysts at Barclays said in a report.
“However, in the context of a global financial and economic structure that is still muddling through, there does remain a strong possibility of some further intense mood swings in the oil market.”
A decline in the dollar is also supporting oil. The dollar index .DXY slipped 0.19 percent on Thursday. The greenback has been under pressure on expectations the Fed would opt for a third round of bond purchases, or quantitative easing, to support the economy. A weakness in the currency boosts dollar-denominated commodities such as oil.
Brent will gain further to $107.78 per barrel as it has broken above a resistance at $103.22, while U.S. oil will rise to $90.88 per barrel as it has also broken past a resistance, according to Reuters technical analyst Wang Tao. <TECH/C>
A surge in Middle East tension provoked supply concerns, however.
Six people were killed in a bomb attack on a bus carrying Israeli tourists at a Bulgarian airport on Wednesday and Israel accused Tehran of carrying out the attack, promising a strong response to ”Iranian terror.
Oil also drew support on fears the 16-month revolt against Syrian President Bashar al-Assad would worsen after a bomber killed and wounded his security chiefs and rebels closed in on the center of Damascus.
Yet gains in oil were capped by data from the Energy Information Administration (EIA) on Wednesday showing crude stocks in the United States fell less than expected last week as crude imports rose and refineries scaled back processing rates.
Domestic stocks of crude, excluding oil held in the Strategic Petroleum Reserve, fell 809,000 barrels to 377.39 million barrels, the EIA reported, compared with an analysts poll that forecast a drop of 1.2 million. Gasoline inventories fell 1.82 million barrels, bucking analyst expectations for a 1.2-million-barrel increase. <EIA/S>
Reporting by Manash Goswami; Editing by Clarence Fernandez