UPDATE 8-Oil up 1.0 pct near $110 as Israel launches Gaza offensive

Wed Nov 14, 2012 5:06pm EST

Related Topics

* Israeli Gaza air strike highlights geopolitical risks
    * Force majeure on Keystone pipeline due to power problems
    * U.S. crude inventories seen higher - Poll
    * Coming Up: EIA oil data 11 a.m. EST Thursday

 (Updates volume, adds API data paragraphs 9,19-23)
    By Robert Gibbons and David Sheppard
    NEW YORK, Nov 14 (Reuters) - Brent crude oil prices rose
more than 1.0 percent toward $110 a barrel on Wednesday,
snapping a two-day slide after Israel launched an offensive
against Palestinian militants in Gaza, reinforcing fears about
tensions in the Middle East disrupting supplies.
    Hamas's military chief was killed when his car was hit by an
Israeli air strike, the Palestinian Islamist group said, as
multiple Israeli attacks hit the Gaza Strip in retaliation for
rockets launched at Israel.
    An Israeli official said the attack on Hamas's top commander
was not the end of the assault on the coastal territory and more
strikes would follow.  
    "There are some ticking time bombs in the Middle East right
now and the Israeli air strikes on Gaza have brought the
tensions in the region back into focus for the oil market," said
Todd Gross, founder of fund management company Hudson Capital
Group LLC in New York.
    Tensions are already high in the region as the Syrian
conflict drags into its twentieth month. Energy markets have
been on edge about the potential for greater supply disruptions
in the Middle East this year, especially as Western sanctions
against Iran curb exports from the OPEC nation. 
    Balancing the supply concerns have been signs of weak demand
in Europe and the U.S. in particular due to slowing global
economic growth.  
    Brent December crude settled at $109.61, up $1.35 on
the day to above the 100-day moving average of $109.50.
    U.S. December crude rose 94 cents to settle at $86.32
a barrel, off the session high of $86.65. Brent's December
contract expires on Thursday, followed by the U.S. December
contract's expiration on Friday.
    Trading was heavy, with U.S. crude volumes 25 percent above
the 30-day moving average, while Brent turnover was up about 13
percent over its 30-day average. 
    The market was also eyeing a series of car bombs that killed
at least 14 people across Iraq on the eve of a Muslim festival
to mark the start of the Islamic year. 
    Also in Iraq, oil exports from Basra offshore terminals were
back to 2.04 million barrels per day after bad weather halted
loadings at the main oil hub on Tuesday. 
    Oil prices also briefly ticked higher after the release of
minutes of the October meeting of Federal Reserve policy-makers,
which showed a number of them believe the central bank needs to
step up its bond purchases next year to support the economy.
    
    Support for higher prices came as well from news TransCanada
Corp declared force majeure on some oil shipments from
the the U.S. Keystone pipeline after a power supply problem
forced it to reduced rates from Saturday through Tuesday.     
    The company said rates were returning to normal levels of
about 500,000 bpd on the line, which brings crude oil from
Canada's tar sands to refineries near Chicago and into the
Cushing, Oklahoma storage hub, delivery point for the U.S. crude
oil future contract. 
    
    
    FISCAL CLIFF
    The geopolitical turmoil allowed the oil market to shrug off
news that U.S. retail sales fell in October for the first time
in three months as Hurricane Sandy interrupted consumer spending
momentum early in the fourth quarter. 
    Other data pointed to muted inflation, with U.S. wholesale
prices falling in October for the first time since May, giving
the Federal Reserve latitude to maintain its easy monetary
policy stance it hopes will nurse the economy back to health.
    Continuing uncertainty about Europe's debt crisis and the
U.S. 'fiscal cliff' weighed on Wall Street equity markets and
limited crude's push higher. 
    Analysts say the serious government budget negotiations in
Washington needed to avoid the automatic spending cuts and tax
increases known as the 'fiscal cliff' are weeks away, but
failure to reach a deal could tip the world's largest economy
into recession.
    
    U.S. OIL INVENTORIES
    U.S. crude oil stocks rose 1.3 million barrels last week,
the industry group American Petroleum Institute said in a report
on Wednesday, building slightly less than expected. 
    Gasoline inventories fell 103,000 barrels and distillate
inventories rose 184,000 barrels, the API said.
    Crude oil inventories were expected to have risen 1.9
million barrels, according to a Reuters survey of analysts taken
ahead of the API report. 
    Gasoline stocks were expected to be down 800,000 barrels and
distillate stockpiles were expected to have fallen 1.3 million
barrels, the Reuters survey showed. 
    Monday's Veterans Day holiday delayed weekly oil inventory
reports by a day. The U.S. Energy Information Administration's
report will be released at 11 a.m. EST (1600 GMT) on Thursday.

 (Reporting by Robert Gibbons and David Sheppard in New York,
Simon Falush in Londona and Manash Goswami in Singapore; Editing
by Marguerita Choy and Carol Bishopric)
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