NEWS & EVENTS: Breaking News
20.12.2011 10:03
Oil edges up on Kazakhstan oil disruption risk
Brent crude futures rose 29 cents to settle at USD 103.64/bbl, after swinging from USD 102.37 to USD 104.57. NYMEX crude rose 35 cents to settle at USD 93.88/bbl, having traded from USD 92.54 to USD 94.42 intraday.
Oil prices edged up Monday as protests in Kazakhstan raised fears of supply disruption even as concerns about Europe's debt crisis and uncertainty about North Korea after the death of leader Kim Jong-il kept investors on edge. Oil workers held a third day of protests in the capital of Kazakhstan's western oil-producing region, after at least 15 people were killed in the Central Asian state's deadliest riots in decades.
This latest supply threat comes on the heels of the Libyan civil war, while tensions run high with Tehran over the country’s nuclear program.
Oil pared gains and briefly moved lower while US equities turned negative as European Central Bank President Mario Draghi gave testimony to the European Parliament about limited Eurozone bond purchases, which blunted earlier optimism about the region's ability to deal with the debt crisis. Draghi’s remarks further weighed on sentiment as he warned the economic outlook faced substantial risks and that bond market pressure on the Eurozone will be "very significant" in Q1 2012. European finance ministers on Monday intend to enhance the IMF's arsenal and press on with a drive for tighter fiscal rules in an attempt to dispel doubts the region can overcome its sovereign debt crisis.
Crude oil trading volumes are thin heading into the Christmas holiday. Brent and US volumes were less than 400,000 lots traded in post-settlement trading, with Brent 34% and US volumes running 41% below the 30-day average.
Ahead of weekly inventory reports, US crude stocks were expected to have fallen last week, with distillate stockpiles slightly lower and gasoline stockpiles up, a survey of analysts showed.
Crude prices were when the dollar initially strengthened on safe-haven buying on North Korean news, while prices pared losses when the dollar later weakened. All in all, we think the North-Korean risk will fade quickly, overridden by the risk of supply disruption in Kazakhstan. The country is a sizeable oil producer with an output of over 1.6 mn bpd, exactly the same amount as Libya's pre-war production.
Moving forward, geopolitical tensions that threaten oil supply appear to have put a floor under prices, and with better economic data stateside, we think there are enough factors to push oil higher, barring any surprises out of the Eurozone.
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