SINGAPORE: Brent crude rose above $111 on Thursday on a surprise draw in US oil stocks and hopes of a recovery in demand as the International Monetary Fund (IMF) sought to boost its resources to help countries grapple with the euro zone crisis.
Asian shares rose to a two-month high and copper to a four-month top as the proposal assured markets policymakers will tackle Europe's debt crisis, adding to hopes from a slew of recent indicators that the zone's problems have not seriously derailed global economic activity. For oil, that means steady demand growth amid supply concerns as tensions with Iran rise.
Front-month Brent crude rose 76 cents to $111.42 by 0313 GMT, reversing two days of losses. US oil rose 91 cents to $101.50, after rising as high as $101.62.
"For oil, the demand side is very positive, as we can see from the recent set of data. The United States is recovering steadily while Asian demand grows," said Tetsu Emori, a fund manager with Astramax Co. in Tokyo. "The supply side is worrying because of the tensions in Iran and very limited spare production capacity elsewhere."
Brent rose to a high of $115 this year supported by concerns over Iran's nuclear programme.
The United States said Iran still has a way out of the growing confrontation. The Islamic Republic should engage major powers in discussion about its nuclear work, which the United States and many other countries say is intended to build a nuclear weapon, as European Union foreign policy chief Catherine Ashton outlined in a letter in October.
Morgan Stanley said it expected geopolitical risks to dominate oil prices in the near term and raised its bull and bear average Brent price forecast. It raised the 2012 bull and bear case prediction for the benchmark by $10 to $125 per barrel and $85 per barrel, respectively.
"If tensions escalate into production disruptions, prices are likely to surge materially higher, with the sustainability of the higher price dependent on the duration and magnitude of production disruption," Morgan Stanley said in a report.
OIL INVENTORY
US crude oil inventories fell unexpectedly, by 4.8 million barrels in the week to Jan. 13, according to the American Petroleum Institute, contrary to analysts' expectations for a 2.8-million-barrel build.
Imports fell by 1.6 million barrels per day (bpd) to 7.89 million bpd, the API said, while gasoline inventories rose more than expected, up 4.3 million barrels, compared with forecasts for a 2.6-million-barrel increase.
A clearer picture on the stockpiles will emerge when the Energy Information Administration (EIA) releases its data later in the day.
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