Oil up as Italy's PM to resign, Brent slips vs WTI

NEW YORK Tue Nov 8, 2011 5:16pm EST

Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange in New York, July 18, 2011. REUTERS/Shannon Stapleton

Traders work in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange in New York, July 18, 2011.

Credit: Reuters/Shannon Stapleton

NEW YORK (Reuters) - Oil prices rose on Tuesday after volatile trading as news that Italy's Prime Minister Silvio Berlusconi is to resign following approval of a new budget deal sparked a late-session rally.

U.S. equities rose and the euro gained against the dollar after Italy's President Giorgio Napolitano announced Berlusconi would step down after a new budget law is approved. Passage is expected by the end of November and Berlusconi later confirmed his intent to resign.

Spread trading limited Brent's gains and its premium to its U.S. counterpart, also known as West Texas Intermediate (WTI), narrowed to $18.20 at settlement after reaching $19.91 intraday. The spread had recovered from its $15.94 low on October 31.

"This buying rotation back and forth within the complex is typical of a valid bull move and we feel that the recent expansion in Brent premium will be contained to about the $20 a barrel area," Jim Ritterbusch, president at Ritterbusch & Associates, said in a note.

ICE Brent December crude, up a fourth straight day, rose 44 cents to settle at $115 a barrel, its highest close since September 15. Brent traded from $114.20 to $116.48.

U.S. December crude rose $1.28 to settle at $96.80 a barrel, highest close since July 28. Tuesday's peak of $97.08, reached in post-settlement trading, was the highest front-month intraday price since August 1.

Brent crude trading volume was 10 percent above its 30-day average, outpacing U.S. volume that was 11 percent below its 30-day average.


Oil prices got a more muted lift from a U.N. International Atomic Energy Agency report that said Iran has worked on developing a nuclear weapon design and other research and testing relevant for such weapons.

Iran denounced the report as baseless and politically motivated. The IAEA's report had been preceded by Israeli media speculation about preemptive air strikes on Iranian nuclear sites, helping push oil prices higher this week.


Forecasts for global oil demand growth in 2011 and 2012 were lowered by the U.S. Energy Information Administration in a short-term outlook. EIA forecasts for non-OPEC oil production in 2011 and 2012 were raised.

Europe's sovereign debt crisis and a slowing global economy were risks to expectations for demand growth cited by OPEC in the producer group's 2011 World Oil Outlook.

OPEC is unlikely to produce more than its current output of around 30 million bpd within the next few months, the group's secretary general said.


U.S. crude oil inventories rose only 148,000 barrels last week, industry group American Petroleum Institute said in a report released late on Tuesday, less than expected.

Crude stocks at the Cushing, Oklahoma, delivery point for the U.S. crude contract, fell 886,000 barrels.

Gasoline stocks fell 1.5 million barrels and distillate stocks fell 2.9 million barrels, the API said.

Ahead of the API report, a Reuters survey of analysts showed crude oil inventories were expected to have risen 400,000 barrels and gasoline by 300,000 barrels.

Distillate stocks were expected to have fallen 2 million barrels.

Separately, MasterCard said on Tuesday that U.S. retail gasoline demand declined 3.6 percent last week from the year-ago period, the largest dip in two months. Pump prices were up 22.5 percent over the same period.

The government data from the EIA follows on Wednesday morning at 10:30 a.m. EST.

(Additional reporting by Gene Ramos and David Sheppard in New York, Claire Milhench in London and Francis Kan in Singapore; Editing by David Gregorio)

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Comments (3)
Ken1006 wrote:
‘Oil prices will also be supported by a slower ramp-up in exports from Libya, and continued unrest in oil producers Syria and Nigeria’ – Unrest in the Northern part of Nigeria has no impact on oil production. Please get your facts right!

Nov 08, 2011 4:35am EST  --  Report as abuse
vineman wrote:
Hey—- all you Wall Street oil traders, my dog is about to have puppies.
That should give you another reason to trade up on oil futures, you’re using almost everything else as an excuse.

Nov 08, 2011 6:26pm EST  --  Report as abuse
Supplies are up, demand is down, prices go up. Is anyone surprised?

Nov 08, 2011 7:22pm EST  --  Report as abuse
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