August 6, 2012 / 10:54 AM / 7 years ago

UPDATE 11-Oil hits 11-week high on strong equities, weak dollar

* Wall Street hits three-month high on hopes for Europe
    * Investors await more stimulus from U.S., EU, China
    * Coming up: API oil data 4:30 p.m. EDT on Tuesday

 (Updates Brent, U.S. crude volume)
    By Robert Gibbons
    NEW YORK, Aug 6 (Reuters) - Oil prices rose for a second
straight session on Monday, closing at the highest level in 11
weeks, as U.S stock markets rallied to a three-month high and as
traders eyed ongoing turmoil in the Middle East.
    The gains extended Friday's strong rally after supportive
U.S. jobs data calmed concerns about a slowing economy and on
hopes that Europe can address its debt crisis.
    "Equities moved higher and the dollar is a little lower and
that may have been enough to stop the early profit taking after
Friday's big jump," said Gene McGillian, analyst at Tradition
Energy in Stamford, Connecticut.
    In London, Brent September crude rose 61 cents to
settle at $109.55, the highest close for front-month Brent since
May 16.
    U.S. September crude also closed higher for a second
straight session, gaining 80 cents at $92.20, highest for
front-month U.S. crude since July 19.
    Brent's premium against U.S. crude CL-LCO1=R dropped to
$17.35, from $17.54 on Friday. 
    Total crude trading volume was tepid, with Brent crude down
32 percent from its 30-day average and U.S. crude down 26
percent from its 30-day average, according to Reuters data. 
    At one stage in Monday's trading, prices were further
boosted after a fake Twitter account, pretending to be from the
Russian Interior Minister Vladimir Kolokoltsev, said President
Bashar al-Assad of Syria had been killed or injured.
    While many oil traders said the Twitter message was a
blatant hoax, an assertion confirmed by a later message from the
account's operator, oil prices initially rose as the rumor
circulated around markets. 
    Violence in Syria and Iran's dispute with the West over
Tehran's nuclear program continued to keep oil investors worried
about the potential threat to oil supply in the region.
    Ahead of weekly U.S. petroleum inventory data, U.S. crude
stockpiles were forecast to have fallen 500,000 barrels last
week, according to a Reuters poll. 
    Distillate stocks rose while gasoline supplies fell, the
poll also showed.
    
    ECB HOPES  
    Expectations for more stimulus measures to support the
debt-laden euro zone and the latest pledge by China, the No. 2
oil consuming country, to intensify its fine-tuning of monetary
policy to support economic development also helped keep a floor
under oil prices. [ID:ID:nL4E8J501W] 
     U.S. stocks hit a three-month high as traders bet that
European Central Bank (ECB) plans to lower borrowing costs for
Spain and Italy would work, adding to the bullish sentiment
after Friday's strong U.S. July jobs additions. 
    Enbridge Inc said it plans to restart on Tuesday a
pipeline that leaked more than 1,000 barrels of crude onto a
Wisconsin field after receiving the green light from U.S.
regulators. 
    The shutdown since late last month of Line 14, which carries
crude from Canada to U.S. Midwest refineries, had lifted Midwest
refined products differentials to the benchmark futures
contracts last week. 
    U.S. gasoline futures slipped slightly in seesaw
trading, while U.S. heating oil rose 0.51 percent.
    
    EYE ON THE STORM
    Tropical Storm Ernesto strengthened in the western Caribbean
Sea on Monday and was forecast to smack into Mexico's Yucatan
Peninsula as a hurricane. 
    The U.S. National Hurricane Center's five-day forecast cone
projects Ernesto to push back into Mexico after it crosses the
Yucatan and enters the Gulf of Mexico, avoiding the oil and gas
producing areas off the Texas and Louisiana Gulf Coast.
    Meanwhile, Tropical Storm Florence dissipated into a remnant
low pressure area without threatening land.
    
     
           
 
    MIDDLE EAST UNCERTAINTY
    The violence in Syria and Iran's dispute with the West over
Tehran's nuclear program continue to keep oil investors worried
about the potential threat to oil supply in the region.
    Syria's prime minister defected to the opposition seeking to
overthrow the government of President Bashar al-Assad.
 
    The fleeing minister, Riyad Hijab, is from Syria's Sunni
Muslim majority, like much of the opposition. While not part of
Assad's inner circle, as the most senior serving civilian
official to defect Hijab's departure dealt a symbolic blow to an
establishment rooted in Assad's minority Alawite sect.
    Iran, a close ally of Syria's president, plans to host a
meeting of regional and other countries this week on ways to
resolve Syria's conflict. 
    However, only countries with a "realistic" stance on the
conflict will be invited to the meeting on Thursday, Deputy
Foreign Minister Hossein Amir-Abdollahian was quoted as saying.
    The report did not say which countries would be involved.
Syria and Iran have accused Turkey, Qatar and Saudi Arabia of
backing rebels in Syria and fueling violence there.
    Egypt branded Islamist gunmen who killed 16 police near the
Israeli border as "infidels" and promised on Monday to launch a
crackdown following the massacre that has strained Cairo's ties
with both Israel and Palestinians. 
    Egypt's Muslim Brotherhood said on its website that the
attack on a police station in Sinai on Sunday in which 16
policemen were killed "can be attributed to Mossad" and was an
attempt to thwart Islamist President Mohamed Mursi.
 

 (Additional reporting by Gene Ramos and David Sheppard in New
York and Florence Tan in Singapore; Editing by Marguerita Choy
and David Gregorio)
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