Oil holds above $114 on Middle East supply worries

Wed Oct 10, 2012 9:02am EDT
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By Alice Baghdjian

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.   Continued...

A worker holds up a fuel pump nozzle after filling up the tank of a car at a petrol station in Cairo October 3, 2012. REUTERS/Mohamed Abd El Ghany