Published September 03, 2013
Brent crude oil futures rose more than $1 per barrel on Tuesday and settled 1.2 percent higher, fueled by tighter global supplies and as U.S. lawmakers voiced support for military action against Syria, upholding fears of oil supply disruptions in the broader Middle East.
U.S. President Barack Obama urged quick congressional action authorizing the use of military force against Syria and won support of leaders from both parties in the U.S. House of Representatives for limited strikes against President Bashar al-Assad's forces.
U.S. oil prices hit their highest level this year on Aug. 28, while Brent prices were at their highest since February.
Syria is not a major oil producer but investors feared a military strike against the nation could spread across the Middle East, which pumps a third of the world's oil.
There's a roughly $10 per barrel geopolitical risk premium built into the price, said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut.
"You'll see the geopolitical risk deflated as time goes by if we don't see any real supply disruptions," he said.
The recent rally in crude oil prices has brought Mexico into the market to execute its 2014 oil hedging program, trade sources said.
As well, speculative traders hiked bullish bets on crude oil prices for the first time in five weeks, taking them to the second-highest level on record.
Brent crude oil settled $1.35 per barrel higher at $115.68. Front-month U.S. crude oil prices settled 89 cents per barrel higher at $108.54. Due to the Labor Day holiday, the U.S. oil market did not issue a settlement price on Monday.
Supply disruptions elsewhere in the market underpinned prices. Some North Sea cargoes have been delayed into October.
Libyan exports are already running at below 10 percent of export capacity, according to a Reuters estimate, as armed groups tighten their grip on the sector.
Outages in Libya, South Sudan, Iraq and Nigeria amounted to 3.15 millions of barrels per day (bpd), about 3.5 percent of daily world oil demand of 90 million bpd.
On Tuesday, Sudan lifted a threat to block oil exports from South Sudan, though that amounts to only around 150,000 barrels per day.
Last week Saudi Arabia, the world's largest oil exporter, said it would pump a record 10.5 million bpd of crude on average throughout the third quarter in a bid to help balance the market, U.S. energy consultancy PIRA said.
U.S. crude got an early boost from reports showing demand picked up in the U.S. manufacturing sector and steady growth in China's services sector, adding to other positive signals from the world's two largest oil consumers.
Investors were also waiting on U.S. jobs data to be released on Friday as a gauge of economic recovery, and a clearer indication from the Federal Reserve as to when it may rollback in its monetary stimulus program, largely seen as supporting commodities prices.
(By Jeanine Prezioso; Additional reporting by Anna Sussman in New York and Simon Falush in London; Editing by Jeffrey Benkoe, David Gregorio and James Dalgleish)