Brent crude advanced for the first time in five days amid freezing weather and signs of economic recovery in the U.S. and concern that clashes in Iraq may disrupt oil exports.
Futures advanced as much as 1 percent in London. The coldest air in almost 20 years is sweeping over the central U.S. toward the East Coast, bolstering energy demand. U.S. service industries probably rebounded last month, according to a Bloomberg forecast before data today. Iraqi security forces, militias or tribesmen may start an attack to retake Fallujah from al-Qaeda-linked militants, a government official said.
“The recent gain in prices is likely a combination of the cold weather in the U.S., wobbly security situation in Iraq and traders finding their feet in 2014,” said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark. “Liquidity is still rather subdued.”
Brent for February settlement gained as much as $1.07 to $107.96 a barrel on the London-based ICE Futures Europe exchange and was at $107.79 as of 12:42 p.m. local time. The European benchmark crude was at a premium of $13.53 to West Texas Intermediate. The spread closed at $12.69 on Jan. 3, widening for a fourth day.
WTI for February delivery was at $94.26 a barrel in electronic trading on the New York Mercantile Exchange, up 30 cents. The grade declined 6.3 percent last week, the steepest loss since June 2012. Prices advanced 7.2 percent last year. The volume of all futures traded was about 24 percent below the 100-day average.
Diesel and natural gas also rose on Nymex amid the forecasts for colder-than-normal weather across the East Coast.
Fallujah is located about 64 kilometers (40 miles) west of Baghdad in Iraq’s Anbar province. The street battles in Anbar add to the turmoil caused by the daily car bombs that have complicated Prime Minister Nouri al-Maliki’s struggle to assert control over the oil-rich country following the U.S. pullout. Sectarian violence between Sunni and Shiite Muslims in 2013 was the deadliest in five years. Iraq holds the world’s fifth-largest crude reserves.
In Libya, production at the Sharara oil field, which resumed on Jan. 4 after a three-month halt, will reach 340,000 barrels a day today, Mansur Abdulla, oil movement coordinator at Zawiya Refinery, said in a phone interview. National crude output may rise to 600,000 barrels a day as a result of the restart at Sharara, Ibrahim Al Awami, the head of measurement and inspection at the oil ministry, said. That would be the highest level since August.
Libya, holder of Africa’s largest crude reserves, is the key supplier in the Organization of Petroleum Exporting Countries to watch this year as output and export facilities in the nation’s east remain significantly disrupted, according to Goldman Sachs Group Inc.
Hedge funds and other money managers raised net bullish bets on Brent crude to the highest level in 10 weeks, according to data from ICE Futures Europe.
Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 136,611 lots in the week ended Dec. 31, the London-based exchange said today in its weekly Commitments of Traders report. The addition of 7,670 contracts, or 6 percent, is a second weekly increase and brings the net-long position to the highest since Oct. 22.
The Institute for Supply Management’s non-manufacturing index, to be published today, probably rose to 54.6 in December, according to a Bloomberg News survey of economists. The index probably increased last month from 53.9 in November, the survey shows. A reading above 50 will signal expansion among companies that account for almost 90 percent of the economy.
A gauge of China’s non-manufacturing sector fell today while India, Germany and France are also scheduled to release services data.
“It’s a pretty-heavy data week,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone today. “We could be seeing a little early squaring up, people taking off short positions and taking a bit of a wait-and-see approach. Disappointment at the U.S. production and inventory figures” contributed to the price decline last week, he said.