Oil prices rise towards US$64 on Middle East tension

21 Apr12:01 AM

[LONDON] Oil prices rose in a volatile day of trading on Monday as concerns over tension in the Middle East and a drop in the number of US rigs drilling for crude offset comments from Saudi Arabia's oil minister that Saudi production would stay near record levels in April.

Saudi Arabia has put security forces on alert for a possible militant attack on a shopping mall or energy installation, Interior Ministry spokesman Mansour Turki said on Monday.

Riyadh has been carrying out air strikes against Iran-allied Houthi rebels in neighbouring Yemen since March 26 in a conflict in which nine members of its security forces have been killed by cross-border fire.

Brent crude was up 45 cents at US$63.90 by 1422 GMT, down from an intraday peak of US$64.34. US crude for May delivery was up 89 cents at US$56.63 a barrel, down from an early high of US$56.65.

Prices had risen by as much as 89 cents and fallen by more than a dollar on Monday, driven by a volatile dollar. A strong greenback makes dollar-traded commodities such as crude oil less attractive for holders of other currencies.

US oil drilling rigs fell for a record 19th straight week to the lowest since 2010, data from oil services firm Baker Hughes showed, which has helped lift prices from six-year lows reached in January.

Since the beginning of April, oil prices have risen around 17 per cent, pushed up by reports of a possible dip in US output, but Morgan Stanley warned that Saudi production could be more important than developments in the United States.

"We worry about the market's fixation on the US ... Opec production may be more important as production increased 1 million barrels per day month-on-month in March. Saudi Arabia alone added the equivalent of half of Bakken (the largest US shale oilfield) production in a matter of months - far beyond any US slowdown," the bank said in a note.

Production in the world's biggest crude exporter would stay near record peaks around 10 million bpd in April, Saudi Arabia's oil minister, Ali al-Naimi, told Reuters on Monday in Seoul, where he is due to attend a board meeting of the state oil firm Saudi Aramco.

"I have said many times we will always be happy to supply to our customers with what they want. Now they want 10 million," he said.

Hedge funds and other money managers raised their net long positions to a record 263,578 contracts in the week to April 14, according to data from InterContinental Exchange (ICE) released on Monday.

REUTERS