Oil advanced to the highest level in more than a week in New York amid concern that Middle East unrest will disrupt supply and speculation the U.S. will avert automatic spending cuts and tax rises that threaten to throw the nation into recession.
West Texas Intermediate futures climbed to more than $88 a barrel, extending two weeks of gains. Israel will continue to attack Gaza and may intensify operations, Defense Minister Ehud Barak said. U.S. President Barack Obama is “confident” of a deal on the so-called fiscal cliff, he said after Nov. 16 talks with congressional leaders.
“Geopolitical tensions in the Middle East are not good news for the energy markets,” Fatih Birol, chief economist at the International Energy Agency, said in an interview in Oslo. “Any geopolitical event may well increase the upward pressure on prices.”
Crude for January delivery rose as much as $1.21, or 1.4 percent, to $88.13 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Nov. 7. Futures were at $87.99 at 1:14 p.m. London time. Front-month prices are down 11 percent this year.
Brent for January settlement gained as much as $1.35, or 1.2 percent, to $110.30 a barrel on the ICE Futures Europe exchange in London. The European benchmark contract was at a premium of $22.28 to West Texas Intermediate. The spread narrowed to $22.03 on Nov. 16, the smallest gap in two weeks.
Oil’s advance in New York may stall as futures approach technical resistance along the middle Bollinger Band at about $87.85 a barrel today, according to data compiled by Bloomberg. Crude has settled between this indicator and the lower Band for the past two months.
Money managers cut bullish bets on WTI crude by 18 percent to 100,021 futures and options combined in the week ended Nov. 13, according to data from the Commodity Futures Trading Commission in its Commitments of Traders report on Nov. 16. That was the biggest reduction since May.
In London, hedge funds and other money managers reduced bullish bets on Brent crude by 10,210 contracts in the week ended Nov. 13, according to data from ICE Futures Europe.
Israeli ground forces are poised to invade the Gaza Strip for the first time in almost four years after rocket battles that have killed 71 Palestinians and three Israelis.
“We will continue to act, to attack and perhaps even to intensify the operation,” Barak said yesterday, according to an e-mailed statement. “If there is a need, we won’t hesitate to undertake ground maneuvers.”
World leaders including Obama have called for an end to the conflict before it escalates. The assault threatens further instability in the Middle East and North Africa after a wave of uprisings last year, including one in neighboring Syria that has become a civil war. The region accounted for more than 35 percent of global crude production in 2011, according to BP Plc’s Statistical Review of World Energy.
“Unexpected developments in the Middle East are likely to cause upward spikes from time to time,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London who correctly predicted crude’s slide in October and expects Brent will trade from $105 to $115 a barrel this month.
Obama, speaking at a news conference yesterday in Bangkok, expressed confidence that he and Congress would reach an agreement to avoid the $607 billion deficit-cutting package. House Speaker John Boehner, a Republican, called the talks “constructive” and repeated his offer to discuss tax changes that would increase government revenue in exchange for spending cuts.