Brent rises above $116 on cold snap, tighter Iran sanctions

Tuesday, 07 February 2012 10:26

SINGAPORE: Brent futures rose above $116 on Tuesday, extending gains after prices settled at a six-month high in the previous session as a cold spell in Europe and supply concerns from the Middle East overshadowed fears Europe's debt crisis was worsening.

The European benchmark's premium to US oil stayed around $19 a barrel, near its highest since November, due to the weather and as the United States further tightened sanctions against Iran, stoking already simmering tensions in the region. But, Greece's wrangling over a bailout fund helped cap those gains.

Brent crude rose 14 cents to $116.07 a barrel by 0331 GMT, gaining for a sixth straight day. US oil increased 19 cents to $97.10, partly reversing the previous session's losses.

"The geopolitical events surrounding Iran and the Middle East and the severe cold weather sweeping across Europe is providing support for Brent," said Victor Shum, senior partner at oil consultancy Purvin & Gertz. "We continue to see more upside risks for oil, but Europe's debt crisis will weigh."

The pull and push would keep Brent trading around $116, while US crude may inch up towards $100 as the difference between the two benchmarks narrow, Shum said.

President Barack Obama tightened sanctions on Iran another notch, the White House said on Monday, targeting its central bank and giving US banks new powers to freeze assets linked to the government.

Obama's move, in an executive order he signed on Sunday, was the latest action in an escalating campaign to target the Central Bank of Iran, and was intended to close loopholes in existing sanctions Tehran has exploited.

The ongoing unrest in Syria is also adding to concerns over the stability of the Middle East. A member of the main opposition Syrian National Council said President Bashar al-Assad's forces killed 50 people in a sustained bombardment of Homs, a centre of armed opposition to his rule, two days after activists reported 200 people were killed in shelling.

A bullish target at $118.65 per barrel has been established for Brent as it is riding on a powerful wave "C" or wave (3), while US oil still targets $98.61 per barrel, as a rebound from the Feb. 2 low of $95.44 will continue, according to Reuters technical analyst Wang Tao.

GREECE

Greece's resistance to a set of strict conditions attached to a bailout fund capped the recent strength in Asian shares on Tuesday. Most other risky assets also paused as investors watched if the restructuring talks would be resolved.

Failure to strike a deal to secure the rescue fund risks pushing Athens into a chaotic debt default and threatens to trigger contagion across the whole region.

"International risk markets were largely in a holding pattern last night pending insight into whether Greece will meet the conditions to avoid a disorderly default," Ric Spooner, chief market analyst at CMC Markets, said in a report.