Oil hits one-month high above $105 as Israel strikes Syria

Reuters, Monday 6 May 2013

Israeli strike on Syria rises risks over the Middle East supply of oil, driving prices up

Oil
(Photo: Reuters)

Oil rose above $105 a barrel on Monday to its highest in nearly a month as an Israeli air strike on a Syrian military facility refocused attention on Middle East supply risks, although prices pared gains after weak European economic data.

Israeli jets hit Syrian targets near Damascus on Sunday in an air raid that Western and Israeli officials called a new strike on Iranian missiles bound for Lebanon's Hezbollah. Iran denied the attack was on armaments for Lebanon and urged the region to unite against Israel.

Brent crude touched $105.49 a barrel, the highest since April 11, and was up 53 cents at $104.72 by 0935 GMT. U.S. oil rose to a high of $97.17 and traded up 67 cents at $96.28.

"Rising geopolitical worries have increased the risk premium on oil and the fear is that the Israeli attack is going to lead to a wider involvement of other nations in the Syrian conflict," said Victor Shum, an oil consultant at IHS in Singapore.

"That's allowing oil to extend gains made on the back of strong jobs data in the United States."

Friday's U.S. employment report showed payrolls rose more than expected in April, pushing the unemployment rate to a four-year low of 7.5 percent, easing concerns about a sharp slowdown in the economy.

Brent has gained as much as 9 percent in less than three weeks since reaching a 2013 low of $96.75 on April 18. Its high for the year is $119.17 reached on Feb. 8.

Morgan Stanley cited signs of a stronger physical market for Brent, such as a drop in expected Nigerian crude exports and supply of North Sea crude Ekofisk in June.

"Crude oil fundamentals continue to tighten, with supply disappointing yet again," the bank said in a report on Monday. "The key risk remains weak demand."

Weak economic data from the world's second-biggest oil consumer, China, and Europe's prolonged debt crisis, have helped oil fall from its 2013 high near $120 a barrel.

On Monday, surveys showed the euro zone's business downturn dragged on in April, suggesting the region may be falling deeper into recession this quarter.

And the official China Securities Journal reported on Monday China's export growth was expected to slow to around 10 percent in the second quarter from 18 percent in the first. 

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