SINGAPORE: Brent crude rose above $110 per barrel on Wednesday on fears of supply disruption from the Middle East as clashes raged between Palestinians and Israelis despite overnight truce talks.
But gains in prices were capped by worries over oil demand, especially after US Federal Reserve Chairman Ben Bernanke warned that a failure to resolve a budget crisis could lead to recession in the world's biggest crude consumer.
Fresh concerns about Europe's economy also weighed on prices a day after Moody's stripped France of its prized triple-A badge, citing uncertainty about the fiscal and economic outlook of the euro zone's second-largest economy.
Brent crude futures gained 32 cents to $110.15 a barrel by 0314 GMT, recouping some of the previous session's losses. US crude increased by 30 cents to $87.05.
"There are opposing forces where the uncertainty in Europe and the United States meets with the bullish uncertainty in the Middle East, ... so I think we're going to see a volatile market," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
"We're going to see some crazy volatility in the market with rising geopolitics and rising economic uncertainty. The Middle East tensions could continue to give prices some life in the near term but we suspect that the bearish economic factors will be dominant."
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