February 14, 2011 / 5:52 AM / 9 years ago

US oil rebounds to near $86/bbl on relief after

SINGAPORE (Reuters) - U.S. oil prices rebounded on Monday to near $86 a barrel, after sinking to a 10-week low in the previous session, as tension in the Middle East region dissipated following the resignation of Egyptian President Hosni Mubarak.

London crude prices extended their rally to near $102 a barrel, after the March contract expired with a gain in the previous session.

Mubarak’s departure, after 18 days of mass protests, relieved fears over potential supply disruptions and the spread of turmoil to key oil producers in the Middle East region.

“Concerns over a potential disruption to supplies have eased, and now that the immediate threat is out of the way, the market will start focusing again on macroeconomic fundamentals,” said Ben Westmore, a commodities analyst with National Australia Bank.

U.S. crude for March delivery rose 11 cents to $85.69 a barrel by 0715 GMT, after settling $1.15 lower at $85.58 a barrel on Friday, the lowest close in 10 weeks and down almost 4 percent on the week.

Brent crude for April delivery jumped 70 cents to $101.64 a barrel, after settling at $100.94 a barrel in the previous session. The expired March contract rose 56 cents to settle at $101.43 a barrel, off its $102.03 intraday peak.

The spread between the two grades was just below $16, after settling at a record of $16.27 a barrel in the previous session.

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Westmore expects U.S. crude prices to hold in the mid-$80 a barrel range this week, while Brent prices are expected to stay in a range of $98-$102 a barrel.

“The crude market has shifted focus back to fundamentals. WTI was anchored by record crude supplies in Cushing, while tightness in the North Sea market provided support to Brent prices,” Mark Pervan, head of Commodity Research at ANZ Bank, said in a research note.

Traders will scour a raft of U.S. economic data, including retail sales and consumer prices, due this week for more cues, as well as Chinese January inflation numbers, scheduled for release on Tuesday.

Analysts polled by Reuters expect inflation in the world’s second-largest oil consumer to accelerate to a consensus 5.3 percent from 4.6 percent, but traders said prices may have only risen 4.9 percent.

A stronger-than-expected reading could fuel worries that China will have to hike interest rates more aggressively, raising the spectre of slower growth.

Analysts warn that financial markets could remain under pressure as uncertainty looms over the next phase of Egypt’s political transition and its potential spillover effects to the broader Middle East.

Egypt’s new military rulers dissolved parliament and suspended the constitution on Sunday, but said they would govern only until elections to replace ousted President Hosni Mubarak, possibly in six months.

On the supply side, monthly reports from both the International Energy Agency and OPEC showed higher production from OPEC nations, but they expect global demand to keep rising.

U.S. stocks closed out their second straight week of gains on Friday with a rally sparked by Mubarak’s resignation, while Asian stocks rose on Monday as investors greeted the same news with relief.

With the euro weaker on Monday on renewed concerns over the euro zone debt crisis, the dollar was steady to marginally softer against a basket of major currencies.

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