Oil prices rose on Tuesday as unrest in Yemen threatened to crimp energy exports from the Gulf region and the US dollar slumped to a 15-month low on recovering risk appetite among investors. French oil giant Total warned buyers of liquefied natural gas from its Yemen LNG project that shipments from the country could face cuts due to escalating political unrest, although they remain normal for now.
Thousands of Yemeni protesters took to the streets on Tuesday, clamouring for President Ali Abdullah Saleh to step down. Several top officials have already abandoned Saleh, who warned that his country would descend into civil war if he were forced to quit. Yemen pumps around 290,000 bpd of oil, largely for export, and ships 0.9 billion cubic feet per day of LNG, about 9 percent as much as top LNG exporter Qatar.
In Libya, a bloody standoff between the Muammar Gaddafi regime and rebels in control of the country's east has already slashed oil production from the Opec country by around 75 percent, to below 400,000 barrels a day (bpd). "The situation in the Middle East is still very bullish for oil," said Phil Flynn, analyst at PFGBEST Research in Chicago. "The unrest spreading (there) on top of the conflict in Libya is still the market focus."
Brent crude for May rose 74 cents to settle at $115.70 a barrel. US crude futures for April rose $1.67 to settle at $104 a barrel in light volume on the contract's expiration day. The more active May contract settled up $1.88 a barrel at $104.97. US crude futures broke above a key technical resistance level, clearing the way for a run higher, as momentum builds for a challenge of the year high near $107 a barrel.
US oil futures handily outpaced European Brent, narrowing the transatlantic spread. "Generally, Middle East tensions would strengthen Brent," said Bill O'Grady at Confluence Investment Management in St. Louis. "But the US expiration trade has become really choppy, with a lot of financial players trying to figure out how to play this market and maybe some short-covering going on."
US crude reversed an earlier intraday drop to a low of $101.43, which came after Japan said it would release oil from its strategic stockpiles. The releases could help ease supply concerns following the recent earthquake and tsunami which forced the idling of nuclear reactors and led to power outages.
Oil inventories in top consumer the United States likely rose last week for a third consecutive increase, gaining 2 million barrels on higher imports, according to a Reuters poll of analysts ahead of stocks data to be released Wednesday by the US Energy Information Administration. Iraq's oil minister said Opec is counting on oil prices stabilising around 30-month highs near $120 a barrel. That $120 oil price range is an "acceptable" level that would not hinder global growth, minister Abdul-Kareem Luaibi said.