Oil nears $100 on U.S. data, Mideast worriesStories You Might...

Oil nears $100 on U.S. data, Mideast worries
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By Laura Mandaro, MarketWatch

SAN FRANCISCO (MarketWatch) — Crude-oil futures climbed further above $99, on track for a fifth straight session of gains, as momentum from better U.S. economic data, a drop in inventories and threats of tighter Middle East supplies provided a bullish backdrop Friday.

Trading volume was thin on the New York Mercantile Exchange, ahead of the long Christmas weekend.

Crude for February delivery CL2G +0.26% rose 38 cents, or 0.4%, to $99.91 a barrel. The contract had again tested $100 a barrel in electronic trading ahead of the U.S. open.
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While some of its details proved disappointing, the report added to a growing sense that the U.S. economy was on a modestly improving track, a sense fostered by some of the past week’s reports, including another drop in weekly jobless claims and an uptick in an index of leading indicators.

And just days after the withdrawal of U.S. troops from Iraq, an outbreak of violence in the country combined with prospects for increased international sanctions over Iran related to its nuclear program to put a floor under prices, analysts said.

“After a year in which demand risk has been the primary oil market preoccupation,” wrote Barclays Capital oil analysts Paul Horsnell and Amrita Sen on Friday, “the past few weeks have seen a resurgence in more traditional supply-side concerns.”

In a note entitled “Furies out of the box,” they commented that the unraveling of Iraq’s “fragile political equilibrium” should weigh on prospects for Iraqi output coming on to global markets.

That’s key, they said: “When it comes to having a potential for adding significant volumes over a five to ten year period, Iraq is the main game in town.”

Tensions with Iran could spike in the near term. This weekend, the oil major is planning to engage in naval exercises in the Strait of Hormuz, which is patrolled by ships of U.S. Navy’s fifth fleet as a key transportation route for oil, according to reports.