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Oil Futures Rise Amid Short Covering, Geopolitical Risks

Published: March 5, 2013 | 9:04 am
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Crude-oil futures were higher in Asian trade on Tuesday as investors covered short positions after Nymex settled at a two-month low on Monday.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $90.44 a barrel at 0635 GMT, up $0.32 in the Globex electronic session. April Brent crude on London’s ICE Futures exchange rose $0.43 to $110.52 a barrel.

Despite a drop in China’s official non-manufacturing Purchasing Managers’ Index for February and its latest property cooling measures fuelling concerns over energy demand, oil markets look fairly resilient due to persistent geopolitical risks in the Middle East, a Singapore-based trader said. A warning on Monday from Israeli Prime Minister Benjamin Netanyahu that Tehran’s nuclear program is getting closer to crossing a crucial “red line” will likely support oil prices, he added.

Violence in Libya forced output reduction at the Elephant and Wafa fields, highlighting the continued geopolitical instability in the region, ANZ Research said in a note Tuesday, adding this is positive for oil prices.

Brent remains relatively supported by supply issues in which some North Sea pipeline problems continue to steepen curve backwardation, Jim Ritterbusch at Ritterbusch & Associates said in a research note late Monday.

“We still view Brent-WTI as appropriately priced within the $20-$21/bbl zone and we would expect a test of the high side of this range should Cushing again fail to draw by less than 300,000-400,000 barrels amidst another crude build in total,” Mr. Ritterbusch said.

Investors are now awaiting the American Petroleum Institute’s inventory report and the ECOFIN meeting, both of which are due Tuesday. Investors are also watching developments in the U.S. budget and China’s National People’s Congress which opened today.

Meanwhile, a slew of economic data is also awaited Tuesday, a Tokyo-based trader said, referring to the U.S. non-manufacturing report from the Institute for Supply Management and Europe Union retail sales data for January. He tipped Nymex to trade in the $88.29-$91.72/bbl band ahead of the data releases.

Nymex reformulated gasoline blendstock for April–the benchmark gasoline contract–fell 9 points to $3.0974 a gallon, while April heating oil traded at $2.9267, 76 points higher.

ICE gasoil for March changed hands at $921.75 a metric ton, up $2.75 from Monday’s settlement.


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