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Brent rises above $104 on growing threats to supply

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Hundreds of 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 state's deadliest riots in decades. The country's crude oil production is estimated at around 1.6 million barrels per day.

Brent crude rose 39 cents to $104.03 a barrel by 0204 GMT, after settling up 29 cents at $103.64 on Monday. US crude was up 50 cents at $94.38 a barrel. The benchmark edged up 35 cents to settle at $93.88 in the previous session.

"Geopolitical tensions that threaten oil supply have put a floor under prices, and with better economic data out of the United States, there are enough factors to push oil higher, barring any surprises out of the euro zone," said Ben Le Brun, market analyst with OptionsXpress in Sydney.

Despite the rising tensions in Kazakhstan, Italian oil and gas group Eni said its business in Kazakhstan had not been affected so far by protests there.

There were renewed concerns over supply disruption in Iran, after the OPEC member said crude oil production had dropped due to lack of investment in its oil fields as it faces the West's toughest ever sanctions over its nuclear program.

Japanese Foreign Minister Koichiro Gemba said on Monday there was a danger of hurting the global economy if imports of Iranian crude oil stopped, commenting on US legislation that targets the Iranian central bank.

In Libya, the National Oil Company (NOC) delayed plans to restart its largest refinery at Ras Lanuf by at least a month, as the plant remains cut off from a steady supply of crude for processing.

Market participants were also watching developments in OPEC producer Iraq after the departure of US forces. Iraq issued an arrest warrant for Sunni Vice President Tareq al-Hashemi, after the government obtained confessions linking him to what the official called terrorist activities.

Fresh signs of US economic growth accelerating further lifted sentiment, with data on Monday pointing to a potential recovery in the beleaguered US housing market next year.

EURO ZONE, KOREAN JITTERS

Gains were capped by ongoing concerns that the euro zone debt crisis could tip the global economy into a recession, while fears of regional instability following the death of North Korea's leader Kim Jong-il prompted investors to pull back from risky assets.

European Central Bank President Mario Draghi gave testimony to the European Parliament that dampened the latest wave of optimism about the region's ability to tackle its debt crisis.

"The ECB President's recent statements that the central bank does not have authority to increase its bond purchases leave investors feeling they have little choice other than to maintain a defensive stance at present," said Ric Spooner, chief market analyst with CMC Markets in Sydney.

In North Korea, there was uncertainty about how much support the third generation of the country's ruling dynasty has among the ruling elite, especially in the military, and concern that he might need a military show of strength to help establish his credentials.

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 Reuters survey of analysts on Monday showed.

Copyright Reuters, 2011