UPDATE 3-Oil rises to $116 on Russia-US tension
21 Agustus 2008 15:56:18 (GMT+07:00)
Provided by: Reuters News
* Oil at $116, international tension supports
* US EIA says Saudi Arabia could trim oil supply
LONDON, Aug 21 (Reuters) - Oil rose to $116 a barrel on Thursday, climbing
for a third straight session, as Washington's missile shield deal with
Poland angered Russia, adding to international tension.
The spat adds to political factors that has supported oil prices in recent
months, such as the dispute over Iran's nuclear work. A weaker dollar also
boosted the appeal of commodities as an inflation hedge.
"There's a myriad of geopolitical factors rumbling in the background --
Russia, Iran," said Tony Machacek, broker at Bache Commodities Ltd. "Also,
the dollar is weaker."
U.S. crude <CLc1> gained 66 cents to $116.22 a barrel by 0851 GMT, having
risen as high as $117.00 earlier in the session. Brent crude <LCOc1> climbed
50 cents to $114.86.
The United States and Poland signed a deal on Wednesday to station parts of
a U.S. missile defence shield on Polish soil, drawing a sharp response from
Russia, the world's second-largest oil exporter.
The pact comes as relations between Russia and the West have been strained
by Moscow's military intervention in Georgia. The conflict there has
disrupted the transit of Azeri oil through Georgia.
International tension outweighed a U.S. government report that on Wednesday
showed crude inventories rose by 9.4 million barrels, the largest weekly
increase since March 2001.
Oil has fallen from a record high of $147.27 a barrel reached last month on
evidence that demand is slowing. Prices remain up about 15 percent so far
this year and have climbed from below $20 in early 2002.
Also supporting the market were expectations that the Organization of the
Petroleum Exporting Countries and Saudi Arabia, its top producer, may decide
to trim supply in a bid to stem a further price fall.
Saudi Arabia boosted oil output in July to 9.7 million barrels a day from
9.45 million bpd in June, far above the country's informal OPEC target. OPEC
meets on Sept. 9 to review output policy.
"As prices drop, Saudi Arabia may cut back on its recent increase in
production, which could halt the most recent price decline," the U.S. Energy
Information Administration said in its weekly review of the market.
(Reporting by Seng Li Peng in Singapore and Alex Lawler in London, editing
by William Hardy)
