Oil rebounded from a two-month low as the euro rose against the dollar and tensions between Syria and Turkey fanned concern Middle East production may be disrupted.
Prices increased as much as 1.2 percent and the euro gained after European Central Bank President Mario Draghi said the common currency is “irreversible.” Turkey’s parliament authorized the government to order military action in Syria. A mortar bomb fired across the border yesterday killed five Turks.
“You’ve got a new front in the tensions in the Middle East plus the weakness of the dollar and that’s all adding up to the strength in crude,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The more Draghi speaks, the weaker the dollar gets. We had a strong selloff yesterday and it’s normal we should have a rebound.”
Crude for November delivery gained 88 cents, or 1 percent, to $89.02 a barrel at 9:26 a.m. on the New York Mercantile Exchange. Oil plunged 4.1 percent yesterday after the Energy Department reported U.S. production climbed to the highest level in more than 15 years while fuel usage decreased.
Brent oil for November settlement advanced $1.44, or 1.3 percent, to $109.61 a barrel on the London-based ICE Futures Europe exchange.
The ECB is ready to start buying government bonds as soon as the necessary conditions are fulfilled, Draghi said today at a press conference in Ljubljana, Slovenia, after policy makers left the benchmark rate at a historic low of 0.75 percent.
Euro Advances
The euro increased as much as 0.7 percent to $1.2995, the highest level since Sept. 24. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.
The killings yesterday in the Turkish town of Akcakale highlight the risk that neighboring countries could be drawn into Syria’s civil war. Turkey has backed the rebels fighting to oust President Bashar al-Assad and allowed them to use bases inside Turkey. Turkish artillery units fired yesterday and today at Syrian military targets.
“Turkey-Syria jitters are adding to general concerns in the Middle East,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “There’s some buying on the lows after losses yesterday, and the greenback is also a touch lower.”
Countries in the Middle East and North Africa were responsible for 36 percent of global oil production and held 52 percent of proved reserves in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy.
To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
