Singapore - Brent crude futures rose above $104 on Tuesday, buoyed by the risk of supply being disrupted from Central Asian oil producer Kazakhstan, even as sanctions-hit Iran struggles to maintain its production and Libyan output is delayed.
Hundreds of oil workers held a third day of protests in the capital of Kazakhstan’s western oil-producing region after at least 15 people were killed in the state’s deadliest riots in decades. The country’s crude production is estimated at around 1.6 million barrels per day.
Brent crude rose 56 cents to $104.20 a barrel by 0434 GMT, posting the biggest gain in a week. US crude was up 37 cents at $94.25 a barrel, after rising as high as $94.58 earlier in the day.
“Geopolitical tensions that threaten oil supply have put a floor under prices, and with better economic data out of the United States, there are enough factors to push oil higher, barring any surprises out of the euro zone,” said Ben Le Brun, market analyst with OptionsXpress in Sydney.
Despite the rising tensions in Kazakhstan, Italian oil and gas group Eni said its business in Kazakhstan had not been affected so far by protests there.
There were renewed concerns over supply disruptions in Iran, after the OPEC member said crude production had dropped due to lack of investment in oil fields as the country’s faces the West’s toughest ever sanctions over its nuclear program.
The Islamic Republic is also struggling with crude sales with top buyer China slashing volumes by about half for January than what it typically imports as the two haggle over terms.
“It appears increasingly likely that Iran may need to turn to floating storage - effectively reducing its near-term crude supply - as it has at times in the past when it has had difficulty placing crude,” JPMorgan analysts said in a report.
Oil output“Iran followed Saudi Arabia’s lead in raising OSPs to record levels for January loadings, and given potential payment and political difficulties associated with purchasing Iranian crude, it is unsurprising that some buyers are searching for alternatives,” JPMorgan analysts said.
In Libya, the National Oil Company (NOC) delayed plans to restart its largest refinery at Ras Lanuf by at least a month, as the plant remains cut off from a steady supply of crude for processing.
Market participants were also watching developments in OPEC producer Iraq after the departure of U.S. forces. Iraq issued an arrest warrant for Sunni Vice President Tareq al-Hashemi, after the government obtained confessions linking him to what the official called terrorist activities.
Fresh signs of U.S. economic growth accelerating further lifted sentiment, with data on Monday pointing to a potential recovery in the beleaguered U.S. housing market next year.
Eurozone, Korean jittersYet, gains were capped by ongoing concerns that the euro zone debt crisis could tip the global economy into a recession.
Gold, Asian stocks and the euro steadied on Tuesday, with the overall outlook weak after European Central Bank President Mario Draghi’s testimony dampened the latest wave of optimism about the region’s ability to tackle the crisis.
“The ECB President’s recent statements that the central bank does not have authority to increase its bond purchases leave investors feeling they have little choice other than to maintain a defensive stance at present,” Ric Spooner, chief market analyst with CMC Markets in Sydney, said in a report.
Market sentiment in Asia is already risk-averse, as the death of North Korean leader Kim Jong-il has raised fears of regional instability.
Ahead of weekly inventory reports, U.S. crude stocks were expected to have fallen last week, with distillate stockpiles slightly lower and gasoline stockpiles up, a Reuters survey of analysts showed.