Crude Above $94 On Recovery Hopes, Worries Of Possible Supply Disruption

While hopes over the global recovery continue to improve the outlook for demand on oil, prices found additional support on Monday from fears of a possible disruption in supplies from the Middle East, pushing crude above $94 while Brent is above $111.

Oil exports from Iraq dropped due to bad weather, while a bomb attack on the convoy of the Iraqi finance minister, escalating attacks in Syria and Iranian navy exercises in the strategic Strait of Hormuz triggered new supply fears.

Meanwhile, the world's biggest economies show signs of steady recovery. Last week, China’s trade numbers came better than expected; Japan announced a new stimulus package, while the ECB said the euro-area economy will gradually recover this year.

Moreover, this week's reports may show that the eurozone’s industrial production may improve in November. from the previous month, China's growth may accelerate in the fourth quarter to 7.8% while the consumer confidence may improve in the U.S.

Crude is trading as of this writing around $94.13 a barrel compared with the opening at $93.68 and with the highest at $94.25 and the lowest at $93.65. Brent is trading around the $111.08 after rising 0.40%.

Natural gas is trading around $3.355 per 1,000 cubic feet after rising 0.84%, while heating oil is trading around $3.0235 after rising 0.50% and gasoline around $2.7425 a barrel after rising 0.11%. These developments helped the market recover the previous session losses as 21 tankers, with a capacity of 250,000 to 300,000 barrels, have been booked from Europe to transatlantic destinations (mainly the United States) since the start of January.

Also adding to upside pressures on prices was news that the 805 kilometers Seaway line running from Cushing, Oklahoma, to Freeport, Texas, resumed full service. The pipeline was shut down in January 2 to expand its capacity to 400,000 barrels a day from 150,000 barrels. Meanwhile, caution may persist this week as well, as the earnings season will continue, with Intel, General Electric, Citigroup and Bank of America being among the companies releasing their results, while U.S. lawmakers continue to debate over the nation’s debt ceiling.