By Myra P. Saefong and William L. Watts, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures climbed above $95 a barrel Thursday, finding underlying support following an attack by militants on a natural-gas field in Algeria that raised supply concerns.
“The nasty reawakening of geopolitical tensions always carries a premium for energy prices,” said Matthew Parry, senior oil-market analyst at the International Energy Agency.
Light, sweet crude for February delivery CLG3 +1.38% rose $1.16, or 1.2%, to $95.40 a barrel on the New York Mercantile Exchange.
Prices had touched a low of $93.80.
Militants, with possible links to al Qaeda, seized about 40 foreign hostages including several Americans at a remote gas field in Algeria. An effort by Algerian security forces to storm the facility late Wednesday failed, The Wall Street Journal reported.
The attack leaves around 24 million cubic meters a day of gas and 60,000 barrels a day of liquids production offline, delivering another blow to Algeria’s stagnating gas industry, JBC Energy analysts wrote in a note.
More importantly, the attack may signal “a downswing” for political stability in Algeria, which produced nearly 1.2 million barrels a day of crude and 88 billion cubic meters of gas in 2012, they wrote.
Algeria is “therefore the latest candidate to be added to the long list of countries at risk from political turmoil in the MENA [Middle East-North Africa] region and could underpin the geopolitical risk premium further,” the JBC analysts said.
The front-month contract rose 96 cents in New York Wednesday. Support was primarily tied to an unexpected drop in U.S. inventories and after the Organization of the Petroleum Exporting Countries confirmed a significant production cut last month by Saudi Arabia. See: U.S. crude supply fall surprises; oil reclaims $94.
Tim Evans, energy analyst at Citi Futures, said the reduction in Saudi output “was something of a measured response to soft demand,” noting that steady output at the December rate of production would still result in surplus production.
“Thus, we anticipate both a further modest reduction in OPEC production and rising inventories over the first half of 2013,” he added.
U.S. data released Thursday was upbeat, boosting the prospects for oil demand. Initial jobless claims fell last week to their lowest level since January 2008 and housing starts jumped in December to their highest rate in more than four years. See: Housing starts jump in December.
“We had better-than-expected housing starts and jobless claims [...] while a weaker U.S. dollar and the situation in Algeria supported [oil] prices further,” said Fawad Razaqzada, technical analyst at GFT Markets, in a note.
“All these factors have helped the [West Texas Intermediate] contract to break above that key $94 resistance level, so the technicals are starting to look bullish for crude oil too,” he said.
The only factor that may hamper further gains in the near term is if the upcoming data releases at the end of the week from China disappoint, he said, adding that growth in the world’s second largest economy is expected to have accelerated to 7.8% in the last quarter of 2012 from 7.4% in the third quarter.
Among other energy products, the February contract for gasoline RBG3 +1.12% added 2.5 cents, or 0.9%, $2.75 a gallon, while February heating oil HOG3 +0.73% climbed 2 cents, or 0.8%, to $3.02 a gallon.
February natural-gas futures slipped by nearly 2 cents, or 0.5%, to $3.42 per million British thermal units.
The Energy Information Administration will report its data on natural-gas supplies, covering the week ended Jan. 11, at 10:30 a.m. Eastern.
Analysts polled by Platts expect the figures to show a withdrawal of between 137 billion and 141 billion cubic feet from natural-gas storage.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Follow him on Twitter @wlwatts. V. Phani Kumar in Hong Kong contributed to this report.
