LONDON--Crude oil futures ticked higher Thursday morning, retracing some of the sharp losses incurred in the previous session but with both benchmarks still constricted within a tight range.
At 1025 GMT, the front-month January Brent contract on London's ICE futures exchange is up 21 cents at $109.02 a barrel.
The front-month January light, sweet crude contract on the New York Mercantile Exchange is trading 24 cents higher at $88.12 a barrel.
Both Brent and WTI are following broader economic sentiment and risk aversion, with few fundamental factors not already priced in, although ongoing political and military actions in the key producing region of the Middle East are providing a solid base for prices.
Fundamentally, little changed over the past week, said VTB analyst Andrey Kryuchenkov. He doesn't expect "any interesting headlines" on this front until the Organization of the Petroleum Exporting Countries meeting next week.
The rest of the month will be likely dominated by headlines over "fiscal cliff" negotiations in the U.S., while it is unlikely many traders will be taking large positions ahead of the Christmas holiday period, negating the chance of a move upward.
But should a deal be reached in Congress Brent could be due a December rally, said DNB, which noted a seasonal upswing in 10 of the last 11 years. This could even be extended into early January by the reweighting of the major commodities indexes, but this effect will likely be short-lived and the brokerage expects the average Brent price in 2013 to be lower than in 2012.
But a consensus seems to be forming that oil is unlikely to fall far from current levels.
A drop "is precluded above all by the ongoing risks to supply due to the geopolitical tensions in the Middle East," analysts from Commerzbank wrote in a note.
Although Morgan Stanley cut its 2013 Brent crude price target, to an average $110 a barrel from a previous $115 a barrel, it said price risks are skewed to the upside. Even with relatively generous assumptions on supply and muted demand growth, OPEC production must average near 2012 levels to keep the market balanced, Morgan Stanley said.
SEB, in a note, said any drop below $100 a barrel Brent would get a rapid reduction in Saudi Arabian production causing the oil price to recover fairly quickly, as Saudi Arabia clearly targets a price of between $100-$110 a barrel.
The ICE's gasoil contract for December delivery is up $2.25 at $930.25 a metric ton, while Nymex gasoline for January delivery is up 172 points at 2.6550 cents a gallon.
Write to Ben Winkley at ben.winkley@dowjones.com
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