Reuters: Oil rose towards $56 a barrel on Monday, supported by a cold snap in top consumer the United States and political tensions in Iran. By Fayen Wong
SYDNEY (Reuters) – Oil rose towards $56 a barrel on Monday, supported by a cold snap in top consumer the United States and political tensions in Iran.
U.S. crude climbed 28 cents to $55.70 a barrel by 0812 GMT, extending Friday’s 2 percent gain. London Brent crude rose 29 cents to $55.58.
“Oil prices are likely to rise further because we are seeing a stronger demand outlook for heating oil products in the U.S.,” said Dariusz Kowalczyk, chief investment strategist at SJ Seymour Group.
“News out of Iran over the weekend about progress in nuclear research has also spooked the market a bit.”
An Iranian parliamentarian said on Saturday the country had begun installing 3,000 new atomic centrifuges for uranium enrichment — a process that can make atomic bombs. But the statement was swiftly rejected by an Iranian nuclear official.
The conflicting news raised concerns that simmering tensions between the U.S and Iran, the world’s fourth-largest oil producer, could swiftly worsen, leading to a replay of a price increase that helped push U.S. crude to a record of $78.40 in July.
The Bush administration, which has said it has not ruled out military action if diplomacy fails, has toughened its stance against Iran in recent weeks, accusing Iran of secretly building an atomic bomb.
Kowalczyk said news from the World Economic Forum held in Davos, Switzerland over the weekend, which painted a rosy economic outlook in China and better-than-expected growth in the United States for 2007 were also supporting prices.
Analysts said rising violence in Nigeria heightened worries of further supply cuts in the country, where a wave of attacks has forced the closure of a fifth of oil production capacity.
Militants from the Movement for the Emancipation of the Niger Delta torched a police headquarters in Port Harcourt in the oil-producing Niger Delta on Sunday to free one of their leaders.
Oil prices are still down by 9 percent this month after a fund sell-off, but the market’s failure to break convincingly below $50 a barrel last week led to a rebound in prices.
The Organization of the Petroleum Exporting Countries has said it would wait to assess the impact of existing supply cuts before calling for further reductions.
The cartel agreed in October to curb output by 1.2 million barrels per day (bpd) or 4 percent from November 1, and another 500,000 bpd from February 1 this year after a sharp slide in prices.