Brent crude holds above $107; gains to 8-week highs spur selling

Thu Jul 19, 2012 11:33pm EDT
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By Manash Goswami

SINGAPORE (Reuters) - Brent crude held above $107 on Friday, edging lower after a surge of 20 percent in four weeks prompted some selling as Israel signaled it would not rush into any open conflict over a deadly attack on its citizens, easing geopolitical worries.

Oil rose to an eight-week high in the previous session, gaining for seven straight days as escalating tension in the Middle East and disruptions in output in the North Sea stoked supply fears. A strengthening of the dollar .DXY after a recent slide is also supporting crude futures.

Brent crude slipped 30 cents to $107.50 a barrel by 11.03 p.m. EDT. The contract settled up $2.64 and touched an intraday top of $108.18, the highest since May 22. U.S. oil fell 39 cents to $92.27. The August contract ended up $2.79 and touched a high of $92.94, also the highest since May 22.

"They were getting stretched a little, getting a bit ahead of themselves," said Mark Pervan, senior commodities strategist at ANZ Bank. "This rally is supply driven, and supply-driven rallies tend to be very volatile because when prices go up, they threaten to hurt demand."

Brent is set to gain for a fourth straight week, its longest winning streak since the end of February, while U.S. oil is poised to gain for three of the past four weeks.

The most important supply threat to oil is from the Middle East, as global powers try to force Iran to halt its disputed nuclear programme. Tension escalated after a bus carrying Israeli tourists was bombed in Bulgaria, for which Israel blamed Iran.

Israel's allegation, based on suspicions that Iranian and Hezbollah agents have been trying for years to score a lethal strike on its interests abroad, triggered speculation in local media that the government of Prime Minister Benjamin Netanyahu might now hit back hard.

SUPPLY WOES   Continued...

An employee holds a gas pump at a gas station of Hyundai Oilbank in Seoul June 15, 2012. REUTERS/Choi Dae-woong