Oil prices rallied to 7 week high as bearish investors rushed to cover their bets amid a war of words between Washington, Tel Aviv and Tehran over Iran's nuclear program.
ICE December Brent, the global benchmark rose USD 2.15 per barrel by midday in New York to USD 114.13 per barrel ahead of the release of a report later this week from the International Atomic Energy Agency about Iran's nuclear program.
Iran is a member of the OPEC oil cartel and traders are starting to worry that the IAEA report could lead to an attack by Israel on Tehran's nuclear facilities. An attack could disrupt oil production and lead to closure of the Strait of Hormuz, the gateway for oil exports from key OPEC producers in the Middle East region including Saudi Arabia.
Mr Seth Kleinman oil and gas strategist at Citigroup in London said that "The smart oil traders I know aren't talking about anything else. The rally in Brent prices pushed the contract above the crucial 200 day moving average, triggering automatic buy-orders by computer driven buying programs.”
Analysts said that the market was closely watching to see if the benchmark which has been in a well established downward trend since April could remain above the important technical level and break up the current trading range.
Mr James Zhang oil strategist at Standard Bank said that "People are watching to see where the Brent contract settles."
Meanwhile, ICE Futures Europe the exchange announced it was launching its new ICE Brent NX futures and options contracts next month. The launch by the London-based ICE Futures Europe aims to prevent disconnect between the derivatives and physical markets ahead of a change in the way oil prices are calculated.
Platts, the pricing agency which acts as the de facto regulator of the Brent physical market, said that it would overhaul the formula it uses to estimate the cost of the oil benchmark from January next year.
The first Brent NX contract month available for trading will be December 2012. ICE Futures Europe said it would work with market participants to facilitate an orderly transition of open positions for the contract from existing ICE Brent futures and options.
(Sourced from the Financial Times)
