Oil rises as conflict in Iraq sparks supply disruption fears

OIL rose yesterday in choppy trading, with US crude reaching $100 a barrel, as violence in Iraq and news of upcoming Iranian navy exercises raised fears of potential supply disruptions.

Oil also received a boost from separate reports showing jobless claims fell last week in the United States, while consumer sentiment rose more than expected in December, offsetting news that third-quarter economic growth was pegged lower than the previous estimate.

Dominick Chirichella, analyst at New York’s Energy Management Institute, said financial markets were entering a period of low liquidity and could expect relatively large intraday moves over the end-year festive season.

“Iran and the broader Middle East, including Iraq now that the United States is gone, will continue to act on the oil market with exposure for price spikes at anytime. The geopolitics of the region are once again on the radar.”

Brent February crude rose 43 cents to $108.14 a barrel at one point, having reached $108.50.

Possible resistance at Brent’s 100-day moving average of $109.30 loomed above.

US February crude rose $1.03 to $99.70 a barrel, having reached $100. Both Brent and US crude trading volumes were less than 175,000 lots traded, with Brent 65% below the 30-day average and US volume 75% below its 30-day average.

US crude oil implied volatility fell a fifth consecutive day to a nearly five-month low of 34.25% after opening at its high for the day at 36.37%, using the Chicago Board Options Exchange’s Oil Volatility Index as a proxy.

In Kazakhstan, KazMunaiGas Exploration Production said it expected to meet a reduced oil output target for the year after police deployed armed security around the oilfield closest to the scene of this week’s riots.