Oil prices rose Monday, as deepening hostilities between Israel and Palestinian militants renewed fears about supply risks in the Middle East.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $87.94 a barrel at 0637 GMT, up $1.02 in the Globex electronic session. January Brent crude on London's ICE Futures exchange rose $0.90 to $109.85 a barrel.
The Israel-Palestine conflict escalated Sunday when an Israeli missile killed at least 11 civilians and another struck a Hamas radio facility. Early Monday, Israel launched fresh air strikes on Gaza, pushing the death toll higher.
Before the weekend, Jim Ritterbusch at Ritterbusch & Associates said in a note that the conflict had "sharply increased the likelihood of a test of our long-term resistance (for Nymex, also know as WTI, or West Texas Intermediate) at the $90/bbl area. At the same time, we have raised our downside parameter from roughly $80 to $84/bbl per nearby WTI due to the Israeli-Palestinian military actions."
Credit Suisse said in a research note Monday, "According to our Fair Value models, crude oil prices are close to their valuation, meaning there is currently only a limited risk premium in the market." However, market participants have started to reassess the risk premium as Mideast tensions rise, the bank added.
Renewed concerns over Iran's nuclear ambitions are also putting upward pressure on prices, a Tokyo-based trader said, tipping Brent to test $111 a barrel on the back of Mideast unrest.
Last week, the International Atomic Energy Agency released its quarterly report on Iran. The United Nations inspectors found that Iran has built up its stockpile of 20%-enriched uranium by nearly half over the past three months and sharply increased the number of centrifuges placed in the heavily fortified Fordow enrichment site, Barclays said in a note Friday, adding that "next year may produce an important inflection point for Western nations if the diplomatic track remains stalled."
Meanwhile investors will be on the lookout for developments in Europe, as euro-zone finance ministers gather in Brussels on Tuesday to decide whether to release the next bailout tranche to Athens, traders said.
Nymex reformulated gasoline blendstock for December--the benchmark gasoline contract--rose 217 points to $2.7318 a gallon, while December heating oil traded at $3.0120, 252 points higher.
ICE gasoil for December changed hands at $937.25 a metric ton, up $16.75 from Friday's settlement.
