Crude Around $97.00 As The North Korean Nuclear Test Triggered Tensions

Crude jumped yesterday from the lowest of $94.96 to the highest of $97.07 as South Korea confirmed a nuclear test conducted by North Korea after detecting an unusual 4.9 magnitude seismic activity near a known nuclear test site.

The incident follows weeks of threats from North Korea to build up its nuclear capacity and carry out an attack on the South and on the United States. South Korean President Lee Myung-bak convened an emergency meeting as tensions are rising in the region.

North Korea confirmed Tuesday it had conducted its third, long-threatened nuclear test, posing a new challenge for the United States to prevent Pyongyang from becoming a full-fledged nuclear power.

Crude is trading as of this writing around $96.90 a barrel level compared with the opening at $96.91 and with the highest at $97.01 and the lowest at $96.81. On the short term crude finds support at $95.00 then at $94.70 and resistance at $96.00 then at $96.55.

Meanwhile tensions in the Middle East continue, adding to worries over supplies. Israel said Monday that the new centrifuges Iran was installing for its uranium enrichment program could cut by a third the time needed to create a nuclear bomb.

Yet trade continued to be thin Tuesday due to the Lunar New Year holidays in Asia, with markets in China, Hong Kong, Taiwan, Singapore, Vietnam and Malaysia still being closed, which makes investors reluctant to take big positions.

Meanwhile, the developments in eurozone and the possible rise in U.S. oil stockpiles may weigh on oil prices this week. Germany, France and Italy will release their fourth quarter growth numbers, which are expected to point to a contraction.

In the U.S., crude oil stockpiles may have increased 2.35 million barrels last week, which would be the longest run of gains since May. The EIA report will be released on Wednesday, one day after the American Petroleum Institute releases its weekly report.

Majid Al-Moneef , the Saudi Arabian candidate for the post of OPEC secretary-general dropped out of the contest yesterday, leaving candidates from Iran and Iraq to battle for the post. Saudi Arabia didn’t say whether it would propose another candidate or not.

Brent is trading as of this writing around the $118.08 after falling 0.04%; natural gas is trading at $3.285 per 1,000 cubic feet after rising 0.18%; gasoline is trading at $3.0289 a gallon after rising 0.25%; heating oil is trading at 3.23 after falling 0.05%.