Oil Pares Weekly Gain As Middle East Tension Eases On Cease-Fire
Brent oil fell for a second day in London, paring a weekly gain, as a cease-fire between Israel and Hamas eased concern that tension in the Middle East will disrupt the region’s crude supplies.
Futures slid as much as 0.3 percent, matching yesterday’s decline. The cease-fire crafted by Egypt and the U.S. halted eight days of aerial assaults that ravaged the Gaza Strip and made Tel Aviv a missile target. West Texas Intermediate futures in New York have dropped since the Nov. 21 accord. There was no floor trading in the U.S. yesterday because of the Thanksgiving holiday, and electronic transactions will be booked with today’s trades for settlement purposes.
“Crude prices fell because of profit taking after the truce was announced as the tension in the Middle East eased,” Gordon Kwan, the head of regional energy research for Mirae Assets Securities Ltd. who predicts Brent will trade from $105 to $120 a barrel this year, said by telephone in Hong Kong. “We don’t think the truce will last long. The pullback in crude prices won’t be significant.”
Brent oil for January settlement declined as much 38 cents to $110.17 a barrel on the London-based ICE Futures Europe exchange and was at $110.32 at 3:44 p.m. Singapore time. Prices slipped 31 cents to $110.55 yesterday. Futures are up 1.3 percent this week and 2.7 percent this year. The European benchmark grade traded at a premium of $23.14 to its U.S. counterpart.
Brent has technical resistance along its 200-day moving average, around $111.68 a barrel today, according to data compiled by Bloomberg. Futures have halted advances below this indicator twice so far this month. Sell orders tend to be clustered near chart-resistance levels.
WTI for January delivery was at $87.18 a barrel in electronic trading on the New York Mercantile Exchange, down 20 cents from the Nov. 21 close. The contract has gained 0.6 percent this week and dropped 12 percent this year.
Hamas and Israel are seeking to solidify the cease-fire which took effect at 9 p.m. local time Nov. 21 and was announced by Egyptian Foreign Minister Mohamed Amr and U.S. Secretary of State Hillary Clinton. The conflict threatens further instability in the Middle East and North Africa after a wave of uprisings that started last year, including one that almost entirely halted crude exports from Libya.
Israeli leaders have said that all options, including a military strike, are justified to counter Iran’s nuclear program, which they describe as an existential threat. Iran is the fifth-largest oil producer in the Organization of Petroleum Exporting Countries, data compiled by Bloomberg show.
New York crude futures may decline next week because of the cease-fire, a Bloomberg survey showed. Twelve of 27 analysts and traders, or 44 percent, forecast prices will decrease through Nov. 30. Nine respondents, or 33 percent, predicted a gain. Six forecast little change.
Bloomberg
