May 6 (Bloomberg) -- Brent crude climbed to a three-week high as Syria threatened retaliation against Israel for an air strike. The European benchmark grade’s premium to West Texas Intermediate oil widened from a 16-month low.
Prices rose 1.3 percent after Syria’s state news agency said Israeli aircraft attacked a military research center on the outskirts of Damascus yesterday. The Middle East accounted for 33 percent of global crude output in 2011, according to BP Plc’s Statistical Review of World Energy. The gap between WTI and Brent grew for the first time in three days. Gains accelerated after the Standard & Poor’s 500 Index climbed to a record.
“Brent is leading the way higher, which is consistent with international supply concerns,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We are also getting some broader rebalancing of the market. The U.S. products and Brent got cheap compared to WTI, so they are leading the way today while WTI lags.”
Brent crude for June settlement increased $1.27 to end the session at $105.46 a barrel on the London-based ICE Futures Europe exchange, the highest closing level since April 10. The volume for all contracts traded was 40 percent below the 100-day average for the time of day at 3:35 p.m. in New York. U.K. businesses were closed for a public holiday.
WTI oil for June delivery increased 55 cents, or 0.6 percent, to $96.16 a barrel on the New York Mercantile Exchange, the highest settlement since April 2. Volume for all contracts was 20 percent above the 100-day average.
The European benchmark traded at a premium of $9.30 to WTI futures. It ended the May 3 session at $8.58, the narrowest differential based on settlement prices since December 2011.
Brent is the benchmark for half of the world’s oil. WTI price gains are limited because of ample U.S. crude supplies.
Syria will use “any means” to protect its people, Omran al-Zoubi, the country’s information minister, said on state TV. Syria deployed rocket batteries directed toward Israel, the pro-government Damas Post website said.
Israel didn’t confirm involvement in the assault. The Israeli army said it readied two Iron Dome missile defense systems in the north of the country. They are designed to intercept and destroy rockets capable of flying as far as 70 kilometers (44 miles).
“The Israeli attacks on Syrian targets are raising fears that the Syrian civil war could turn into a regional conflict,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.
The S&P 500 rose 0.2 percent and the Dow Jones Industrial Average was little changed.
WTI and equities climbed last week after U.S. employment rose more than forecast and the European Central Bank cut interest rates to a record low.
Hedge funds and other money managers boosted bullish bets on Brent crude in the week ended April 30 after three consecutive declines, according to data from ICE. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 108,741 lots, the exchange said today in its weekly Commitment of Traders report. The gain of 9,614 contracts came after net longs hit their lowest level since Dec. 11 the previous week.
Net-long positions in WTI held by money managers, including hedge funds, commodity pools and commodity-trading advisers, increased by 11,554 futures and options combined, or 6.3 percent to 193,962 in the seven days ended April 30, according to the Commodity Futures Trading Commission’s May 3 Commitments of Traders report.
Gasoline for June delivery rose 4.03 cents, or 1.4 percent, to $2.8657 a gallon in New York, the highest settlement since April 9. Trading volume was 16 percent below the 100-day average.
Ultra-low-sulfur diesel for June delivery increased 3.58 cents, or 1.2 percent, to $2.9202 a gallon on volume that was 32 percent below the 100-day average. It was the highest settlement since April 10.
Saudi Arabian Oil Co., the largest crude exporter, raised the June premium used to set official selling prices for its Arab Light blend for buyers in Asia and trimmed discounts on all grades to the Mediterranean and Europe.
Implied volatility for at-the-money WTI options expiring in June was 23.7 percent, up from 22.5 on May 3.
Electronic trading volume on the Nymex was 579,865 contracts as of 3:36 p.m. It totaled 690,787 contracts May 3, 18 percent above the three-month average. Open interest was 1.77 million contracts.
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