Oil prices rose on Monday in tug-of-war trading as supply risks and tensions over Iran's nuclear programme provided support, but concerns about economic growth in China and the United States limited gains. The potential for supply disruptions due to Iran's row with the West over Tehran's nuclear ambitions continued to bolster oil prices as US President Barack Obama met Israeli Prime Minister Benjamin Netanyahu in Washington, hoping to convince Israel to give sanctions against Iran more time.
"The geopolitical risk factor is putting a floor under (the price)," said Michael Hewson, senior market analyst at CMC. Intensified sanctions, including a European Union ban on importing Iranian oil slated for July, along with Iran's threats to shut the Strait of Hormuz shipping lane have helped push Brent crude prices up 15 percent in 2012. Brent April crude rose 46 cents to $124.11 a barrel as of 1:45 pm EST (1845 GMT), after falling to $122.66 and testing below the 10-day moving average of $123.62.
US April crude was up 5 cents at $106.75 a barrel, having dropped to $105.50 and reached $107.42, a penny under front-month US crude's 10-day moving average. Crude futures trading volumes were tepid, with Brent and US turnover substantially below 30-day averages. The United Nations' International Atomic Energy Agency said Iran had tripled its monthly production of higher-grade enriched uranium. The IAEA chief said the agency had "serious concerns" about possible military dimensions to Tehran's activities.
An explosion hit the gas pipeline between Egypt, Israel and Jordan in Northern Sinai on Monday, witnesses and state TV said. Another supportive supply concern came from Canada, where Syncrude Canada Ltd shut a coker unit following a Friday fire, reducing production at the 350,000-barrels-per-day oil sands project by nearly a third. China cut its 2012 economic growth target to an eight-year low of 7.5 percent from its long-standing annual goal of 8 percent, weighing on equities and raising the spectre of curbed oil demand.
While the US services sector expanded at its fastest pace in a year in February, new orders for factory goods dropped in January, data showed. "The China lower growth story brought oil down initially, then the IAEA saying they were worried about activities in Iran was supportive," said Phil Flynn, analyst at PFGBest Research in Chicago. "But the US factory orders data was weak, even if the non-manufacturing reading was OK," Flynn said.
The Commerce Department said orders for manufactured goods fell 1.0 percent, the biggest decline since October 2010, while the Institute for Supply Management said its services index rose in February, besting economists' expectations for a drop. Industrial feedstock copper fell more than 1 percent on top consumer China's shaved economic growth and on signs Europe was edging back toward recession. Markit's Eurozone Composite PMI, which gauges the activity of manufacturing and services companies, slipped in February, indicating the euro zone's private sector fell back into decline last month.
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