4 Min Read
LONDON (Reuters) - Brent crude oil held above $114 a barrel and close to a three-week high on Wednesday as worries over the security of Middle East supplies outweighed increasing evidence of slowing global economic growth.
Weak risk sentiment coursed through financial markets, pulling down stock markets and boosting the dollar after the International Monetary Fund said a deepening euro zone debt crisis was threatening the global economy. <MKTS/GLOB> <FRX/>
The IMF said in its semi-annual check on the world's financial health that risks to global financial stability had risen in the past six months, leaving confidence "very fragile.
But shelling along the Turkey-Syria border, hostility between Iran and the West, and an impending Israeli election, have raised worries over the risks to oil supplies from the Middle East Gulf, keeping a floor under prices.
Brent crude fell 27 cents a barrel to $114.23 by 1245 GMT (0845 EDT), after hitting its highest for three weeks earlier in the session. U.S. crude fell 40 cents to $91.99 a barrel.
"It's not that Syria and Turkey are significant oil exporters but Iraqi crude from the northern part of Iraq (Kirkuk) flows via pipeline thorough Turkey to Ceyhan," said Dominick Chirichella, an energy analyst at New York's Energy Management Institute.
"In addition if the Syrian civil war spreads further throughout the Middle East it is only going to result in another level of instability in a region that is very unstable and a region that exports the largest amount of oil to the consuming world countries," Chirichella added.
Israeli Prime Minister Benjamin Netanyahu called an early election on Tuesday, eager to strengthen his political position ahead of any military action against Iran.
"The nuclear dispute with Iran is going to be an election issue in Israel, and this might cause the price to rise in coming weeks, or at least support it," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.
"Other factors are playing a hand in this, such as the tensions between Turkey and Syria," Fritsch added.
Global economic gloom, meanwhile, has put a dampener on many markets. China's annual economic growth probably slowed for a seventh straight quarter in the July-September period to its weakest level since the depths of the global financial crisis, a Reuters poll showed.
On Tuesday the IMF said that the global economic slowdown was worsening and cut its growth forecasts for the second time since April, warning U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
The IMF forecast global output in 2012 would grow by only 3.3 percent, down from a July estimate of 3.5 percent.
OPEC trimmed its forecast for world oil demand growth in 2013 on Wednesday due to a slowing global economy and said it expected a trend for ample supply to persist.
"There is no shortage of supply needing to be offset by additional oil at the moment," Fritsch said. "Indeed, it is rather the supply risks and the ultra-loose monetary policy pursued by central banks that are driving the price upwards."
Investors were looking to weekly data on oil inventories from the United States, due this week, for hints on demand at the top oil consumer. Analysts forecast a 1 million barrel build in crude stocks in the week to October 5. <EIA/S>
Industry data from the American Petroleum Institute will be released at 2030 GMT on Wednesday and figures from the U.S. government's Department of Energy will follow on Thursday, both sets of figures delayed a day by the U.S. Columbus Day holiday.
Additional reporting by Florance Tan in Singapore; editing by Christopher Johnson and William Hardy