Brent rises towards $113 despite euro zone woes

1LONDON: Brent oil prices climbed towards $113 a barrel on Thursday, after sharp falls a day earlier, as a weak dollar and an unexpected drop in US oil stocks outweighed concerns about the spreading euro zone crisis.

Brent crude rose by 45 cents to $112.76 a barrel by 1050 GMT, having fallen nearly $3 the previous day.

The US contract was up 87 cents at $96.61 a barrel by the same time.

"There is enough demand for oil in the world from places like China and the developing world that the euro zone is not of overriding importance," said Jefferies Bache oil broker Christopher Bellew, adding that he thought the market was in a new trading range between $112-$116 a barrel.

"There's strong Chinese demand and falling stocks in the United States ahead of winter."

Chinese trade data showed resilient domestic demand, helping lift sentiment. The world's second-biggest oil consumer imported 20.80 million tonnes of crude in October, up 1.7 percent from September.

US crude and oil products fell last week, with distillate stocks plunging more than 6 million barrels, the US Energy Information Administration data showed on Wednesday.

A 0.40 percent fall in the dollar index also helped spur prices higher on Thursday since it makes oil more expensive for buyers using the US currency.

EURO ZONE TROUBLES

Signs of robust demand in the world's top oil consumers the US and China was enough to temporarily dim concerns about the spread of the European debt crisis to Italy and the impact it could have on demand.

The yield on Italian bills maturing in 2012 soared to the highest since September 1997, placing the Mediterranean country firmly at the heart of the euro zone crisis.

German and French officials have discussed plans for tougher rules that other EU members might not accept, potentially estabilishing a more integrated and potentially smaller euro zone, EU sources say.

The grim economic prospects, combined with high oil prices, prompted the West's energy watchdog the International Energy Agency on Thursday to cut its world oil demand forecast this year and next.

The market continued to weigh the risk of a supply disruption from Iran, as Western leaders called for expanded sanctions against the OPEC member over a UN watchdog report that it has worked to design atom bombs.

Worries over sanctions on Iran, or even an attack on Tehran's nuclear operations, has caused the backwardation or premium for prompt Brent crude over forward prices to narrow.

Traders and analysts are expected to look at US jobless figures due at 1330 GMT for an indication of the pace of economic recovery.

Copyright Reuters, 2011