Brent Climbs Towards $58 on Contract Covering, Geopolitical Tension

SINGAPORE – Brent crude climbed towards $58 a barrel on Thursday for the second straight session as speculators covered their positions ahead of the April contract’s expiry, while a strengthening dollar and a build in U.S. crude stocks capped prices.

Geopolitical tensions in the Middle East and North Africa were also supporting crude futures.

Brent for April delivery rose 24 cents to $57.78 at 0026 ET after gaining $1.15, or 2 percent, in the previous session in a rebound from a one-month low.

West Texas Intermediate was flat at $48.17, after closing the previous session down 12 cents.

“When contracts expire there is more uncertainty and volatility associated with oil. For investors speculating, directionally WTI seems to be facing more pressure heading down. Brent will move upwards,” said Victor Shum, vice president of IHS Energy in Singapore.

The April contracts for Brent and WTI expire next week.

Potential supply disruptions, including escalating violence in Libya where Islamist militants kidnapped nine foreign oilfield workers in an attack on March 6, were the main bullish factors driving investors to a strong Brent price, Shum said.

Meanwhile, a build in U.S. crude inventories, which rose for a ninth straight week to the highest level at this time of year in more than 80 years, helped to cap gains.

Crude inventories rose 4.5 million barrels last week to 448.9 million, data from the U.S. Department of Energy’s Energy Information Administration showed on Wednesday.

Any gains in oil prices could be short-lived as oil stocks are expected to continue increasing due to refinery maintenance and the greenback is expected to continue strengthening against the euro, said analysts.

“I expect that with refinery maintenance peaking (in the U.S., Europe and Asia) in mid-April, that will push oil prices down,” Shum said. He estimated about 3 million barrels per day of refining capacity would be taken out of the market.

The euro slipped to a fresh 12-year low against the dollar on Thursday, continuing to buckle from the pressure felt since the European Central Bank launched its quantitative easing scheme at the start of the week.

The dollar index also rose to brush 100.00 on Thursday for the first time since April 2003.

A strong greenback makes goods denominated in the dollar more expensive for holders of other currencies and limits their purchases for commodities and other assets.

(Source: InterAksyon.com)

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