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Crude oil climbs 1% as Isaac threatens output in Gulf of Mexico

Published 08/27/2012, 03:38 AM
Updated 08/27/2012, 03:38 AM
Investing.com - Crude oil futures were higher during European morning hours on Monday, as market participants monitored tropical storm activity in the Gulf of Mexico, amid concerns over a disruption to supplies from the region.

Hopes for near-term easing measures in the U.S. and Europe further boosted the appeal of growth-linked assets.

On the New York Mercantile Exchange, light sweet crude futures for delivery in October traded at USD96.96 a barrel during European morning trade, climbing 0.85%.

Earlier in the day, prices rose by as much as 1.5% to trade at a session high of USD97.72 a barrel. Prices hit USD98.28 a barrel last Thursday, the highest since May 4.

The U.S. National Hurricane Center said late Sunday that Tropical Storm Isaac was expected to strengthen to a Category 2 hurricane with 48 hours, as it swept over the Florida Keys towards the oil-rich Gulf of Mexico.

Isaac is expected to move into the eastern Gulf of Mexico early Monday, the NHC said.

Oil giant British Petroleum said it was shutting production and evacuating all crew members at its Thunder Horse oil and gas platform in the Gulf, the world's largest, in preparations for the storm.

Energy traders track tropical storm activity in the event it disrupts production in the Gulf of Mexico, which is home to 23% of U.S. oil production.

Prices found further support from growing expectations the Federal Reserve will launch a fresh round of stimulus to boost economic growth in the U.S.

Fed Chairman Ben Bernanke told a congressional oversight panel on Friday that the U.S. central bank has room to deliver additional monetary easing to stimulate the U.S. economy.

Market players looked ahead to a speech by Bernanke at an annual symposium in Jackson Hole, Wyoming at the end of the week, amid ongoing speculation over how close the U.S. central bank is to implementing more stimulus measures.

He has used the event the previous two years to flag the Fed's intention on more easing.

Growing expectations that the European Central Bank will implement policy measures to help stabilize the euro zone's sovereign debt markets at its next policy meeting in early September further supported the precious metal.

ECB President Mario Draghi will speak at Jackson Hole on Saturday.

Oil markets have been bullish lately, with New York-traded crude prices up approximately 20% since touching a low of USD77.27 a barrel on June 28.

Prices have been well-supported amid growing expectations that central banks around the world will soon announce fresh stimulus measures to help spur weak global growth.

Renewed fears over escalating violence in Syria and lingering tensions between Iran and the West have also been supporting prices in recent weeks.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for October delivery rose 0.9% to trade at USD114.65 a barrel, with the spread between the Brent and crude contracts standing at USD17.69 a barrel.

London-traded Brent prices touched USD116.18 a barrel on August 23, the highest since May 4.

Brent prices came under pressure Friday, losing 1.3% after reports surfaced that the International Energy Agency was likely to tap strategic oil reserves as soon as September.

Brent prices have been well-supported in recent weeks, rallying nearly 22% from the lows touched in June, amid growing concerns over tightening supplies from the North Sea region and following the launch of Western-led sanctions targeting Iranian oil exports on July 1.

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