BLBG:Oil Rises a Second Day Amid Israel Conflict, U.S. Budget Talks
Oil rose for a second day in New York amid concern Middle East unrest will disrupt supplies and speculation the U.S. will avert spending cuts and tax increases that threaten to throw the nation into a recession.
Futures climbed as much as 1.2 percent after capping a second weekly advance. Israel will continue to attack Gaza and may intensify operations, Defense Minister Ehud Barak said. U.S. President Barack Obama is “confident” he will reach a deal on the so-called fiscal cliff, he said after Nov. 16 talks with congressional leaders.
“The market is concerned about an escalation to the conflict in Israel,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “Nervousness about the Middle East” is forcing some traders who had bet on falling prices to buy back contracts, he said.
Crude for January delivery rose as much as $1.07 to $87.99 a barrel in electronic trading on the New York Mercantile Exchange and was at $87.88 at 3:47 p.m. Singapore time. The contract increased $1.05 to $86.92 on Nov. 16. Front-month prices are down 11 percent this year.
Brent for January settlement gained 72 cents, or 0.7 percent, to $109.67 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $21.79 to West Texas Intermediate. The spread narrowed to $22.03 on Nov. 16, the smallest gap in two weeks.
Israel Attack
Oil’s advance in New York may stall as futures approach technical resistance along the middle Bollinger Band at around $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 crude oil 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.
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 during an appearance near Tel Aviv 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 almost 40 percent of global crude production in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy.
Budget Talks
“The geopolitical risks affect oil markets and any escalation of tension in the Middle East pushes oil prices upward,” Fahad Alturki, Riyadh-based senior economist at Jadwa Investment Co., said in a telephone interview Nov. 18.
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.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
