Oil Heads for First Weekly Gain in Month on Syria Tension
Oil headed for its first weekly gain in a month in New York as OPEC production fell to the lowest level in eight months and increasing Middle East tensions prompted concern that supplies may be further disrupted.
Futures were little changed after rising as much as 0.6 percent earlier. Production in the Organization of Petroleum Exporting Countries fell 510,000 barrels a day to 31.17 million a day last month as sanctions reduced Iranian exports, the International Energy Agency said. Brent traded near the highest premium in a year to West Texas Intermediate grade after Turkey said a Syrian plane that it grounded contained munitions, while Italian Foreign Minister Giulio Terzi said Europe is prepared to tighten measures against the Iran.
“The noose of U.S. and European Union-led sanctions continues to tighten around Iran’s exports,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London.
Crude for November delivery was at $92.35 a barrel in electronic trading on the New York Mercantile Exchange, up 28 cents, at 1:03 p.m. London time. The contract yesterday climbed 82 cents to $92.07. Prices are up 2.7 percent this week and down 6.6 percent this year.
Brent for November settlement on the London-based ICE Futures Europe exchange declined 51 cents to $115.20 a barrel, trimming this week’s gain to 2.8 percent. The European benchmark crude was at a premium of $22.86 to WTI, down from $23.64 yesterday, the biggest gap since October 2011.
Global oil demand will increase next year by 800,000 barrels a day to 90.5 million, the Paris-based IEA said in its monthly oil market report today, keeping its growth estimate unchanged from last month. Worldwide fuel demand is projected to gain 1.2 percent annually to 95.7 million barrels a day in 2017, the agency said in a separate report.
Oil may extend gains in New York after its moving average convergence-divergence indicator rose above the signal line yesterday for the first time in four weeks, according to data compiled by Bloomberg. Investors typically buy contracts on a so-called bullish MACD crossover. Crude has technical resistance along its middle Bollinger Band, around $93.50 a barrel today.
The Syrian Arab Airlines plane that was forced by Turkish F-16 jet to land on Oct. 10 contained equipment and munitions sent for the Syrian Defense Ministry from a Russian institution equivalent to a state arms manufacturer, Recep Tayyip Erdogan, Turkey’s prime minister, said yesterday. The confiscation of the cargo follows the shelling of a Turkish border town by Syrian President Bashar al-Assad’s forces and Turkish artillery barrages in response over the past week.
Europe is prepared to tighten sanctions on Iran if talks stall over the country’s nuclear program, Terzi said in a Bloomberg Television interview yesterday. A European Union ban on the purchase, transport, financing and insurance of Iranian oil went into effect on July 1. Military action against the Persian Gulf nation, which has been threatened by Israeli leaders, wouldn’t be effective, Terzi said.
“The potential for a blow-up in the Middle East is being reflected in that persistently wide spread between Brent and WTI,” said Michael McCarthy, a chief market strategist at CMC Markets in Sydney.
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