Fundamental Analysis Commodities
November 19, 2012 @ 9:10 pm

Oil prices surge on Middle-East tensions

Crude oil prices surged about 3 percent on Monday, climbing to the highest level since mid-October as concerns grow over a supply shortage  due to escalating violence in the Middle East.

The Israeli-Palestinian conflict  began last week on Wednesday and has worsened as Israel bombed dozens of targets in the Gaza Strip on Monday. Israel has said it was prepared to step up its offensive by sending in ground troops, but also mentioned it preferred a diplomatic solution that would end Palestinian rocket fire.

United Nations Secretary General Ban Ki-moon was due to arrive in Cairo on Monday to support ceasefire efforts led by Egypt, which borders both Israel and Gaza and whose Islamist-rooted government has been hosting leaders of Hamas.

Eventhough oil supply has not been disrupted so far, investors are still nervous because the  confrontation is near the Gulf region which supplies a third of the world’s crude oil.

Brent futures traded up $3.15 to $112.10 by 1:55 p.m. New York time (1855 GMT) after touching a high of $112.09, the highest intraday trade since October 19.

U.S. crude oil rose $2.79 to trade at $89.71 a barrel.

Meanwhile oil prices also were buoyed by  expectations that US lawmakers will avoid a budget crisis, dubbed the “fiscal cliff”. A resolution will help avert a recession and help support economic recovery in the world’s biggest oil consumer.

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