Log In | Register
SINGAPORE — Oil prices rose to above $42 a barrel Friday in Asia as traders speculated that a second front is opening in Israel's Gaza offensive, but analysts said gains would likely be limited by continuing weakness in demand for crude.
Light, sweet crude for February delivery rose 31 cents to $42.03 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore. The contract overnight fell 93 cents to settle at $41.70.
Lebanese militants fired at least three rockets into northern Israel on Thursday, threatening to open a new front for the Jewish state as it pushed forward with an offensive against Hamas in the Gaza Strip that has killed about 700 people. Israel responded with mortar shells.
Oil prices had risen earlier this week to above $48 from a five-year low of $33.87 a barrel on Dec. 19 on investor concern that the conflict in Gaza could engulf Middle East and affect supplies but then dropped sharply on new evidence of weak demand for crude.
"Some traders may be nervous fighting could spread," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "Iran has been racheting up the rhetoric."
Top Iranian leader Ayatollah Ali Khamenei said Thursday his country would not spare any effort to assist Hamas, though he banned hardline student groups from carrying out suicide bombings in Israel.
An Iranian Revolutionary Guard commander earlier this week called on Islamic countries to use oil as a weapon to end the fighting in Gaza.
Oil prices had fallen the previous two trading sessions on expectations a severe global economic slowdown will undermine crude demand.
On Thursday, President-elect Barack Obama said the recession in the U.S. could "linger for years" unless Congress approves a spending package and tax cuts that will cost as much as $1 trillion.
Dismal employment news and lousy reports from retailers also heighten fears that consumer demand will continue to weaken.
The Labor Department said 4.61 million Americans continued to seek jobless benefits, up 101,000. That exceeded analysts' expectations of 4.5 million and was the highest level since November 1982.
Wal-Mart, the largest retailer in the U.S., slashed its fourth-quarter earnings forecast with sales less than analysts expected while department-store operator Macy's Inc. said it will close 11 stores in nine states — affecting 960 employees — and also lowered its forecast for the fourth quarter.
"Demand is bad — that's the underlying reality," Chu said. "Unless there's a major shock, the market will likely drift back down below $40."
In other Nymex trading, gasoline futures rose 2.69 cents to $1.11 a gallon. Heating oil gained 1.68 cents to $1.55 a gallon while natural gas for February delivery jumped 4.2 cents to $5.63 per 1,000 cubic feet.
In London, February Brent crude rose 67 cents to $45.30 a barrel on the ICE Futures exchange.
