Oil prices rose Monday in choppy trading as protests in Kazakhstan raised fears of supply disruption even as persistent concerns about Europe's debt crisis and uncertainty about North Korea after the death of leader Kim Jong-il fuelled investor caution.
Oil workers held a third day of protests in the capital of Kazakhstan's western oil-producing region, after at least 15 people were killed in the Central Asian state's deadliest riots in decades. This latest threat to oil supply comes as Libya works to restore output and exports after its civil war and with tensions remaining high over Iran's dispute with the West over Tehran's nuclear programme.
Brent pared gains, US crude briefly turned lower and equities on Wall Street turned negative as European Central Bank President Mario Draghi gave testimony to the European Parliament that dampened the latest bout of optimism about the region's ability to tackle its debt crisis. "Draghi was a drag, as Europe continues to struggle with its problems," said Phil Flynn, analyst at PFGBest Research in Chicago.
In London, ICE Brent crude for February delivery settled at $103.64, up 29 cents, or 0.28 percent, after trading between $102.37 to $104.57. On the New York Mercantile Exchange, crude for January delivery settled at $93.88 a barrel, gaining 35 cents, or 0.37 percent, after trading between $92.54 and $94.42.
Crude trading volumes remained tepid as the Christmas holiday approached. Brent outpaced US crude at midday in New York, but both contracts had less 300,000 lots traded and were well under 30-day averages. Crude prices were buffeted early, getting pressured when the dollar initially strengthened on safe-haven buying on the North Korean news, only to have oil prices rise when the dollar later reversed and weakened.
"There was some overnight pressure in tandem with the Asian stocks down on the death of Kim Jong-il, but I am not sure that the oil markets will maintain much of a North Korea risk," Petromatrix's Olivier Jakob said. Bond market pressure on the eurozone will be "very significant" in the first quarter of next year, the ECB's Draghi said. Draghi said that in the first quarter of next year, some 230 billion euros of bank bonds are expiring, as are 250 billion to 300 billion euros in government bonds, and that more than 200 billion euros collateralised obligations issued will be due in the course of next year. European finance ministers pursued plans on Monday to enhance the IMF's arsenal and press on with a drive for tighter fiscal rules in an attempt to assuage doubts the region can overcome its sovereign debt crisis.
Commerzbank analysts noted Kazakhstan is a sizeable oil producer at over 1.6 million barrels per day - "exactly the same amount as Libya's pre-war production." Iraq's production and exports could become even more fragile after the departure of US forces, with many expecting internal Iraqi strife to increase.
Iraq has issued an arrest warrant for Sunni Vice President Tareq al-Hashemi, a senior security official said, after the government obtained confessions linking him to what the official described as terrorist activities. The last convoy of US soldiers pulled out of Iraq on Sunday, ending nearly nine years of war.
Meanwhile, Iran has its customers, including China and India, scrambling to lower dependence on Iranian exports as Tehran's dispute with the West and sanctions ramp up tensions. Iran on Monday said its crude production has dropped due to lack of investment in its oil fields as it faces the West's toughest-ever sanctions over its nuclear programme.
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