Brent climbs above $58 on contract cover, geopolitical tension

By Keith Wallis

SINGAPORE (Reuters) – Brent crude climbed above $58 a barrel for a second straight session on Thursday as speculators hedged positions ahead of the April contract expiry, while a strengthening dollar and a rise in stocks of US crude have capped prices.

Geopolitical tensions in the Middle East and North Africa also supported crude futures.

Brent for April delivery was up 61 cents at $58.15 by 0602 GMT, after gaining $1.15, or 2 percent, in the previous session, recovering from a low of month.

West Texas Intermediate rose 20 cents to $48.38, after ending the previous session up 12 cents.

The April contracts for Brent and WTI expire next week.

“When contracts expire, there is more uncertainty and volatility associated with oil. For speculative investors, directionally, WTI appears to be facing more downward pressure. Brent will move higher,” said Victor Shum, vice president of IHS Energy from Singapore.

Brent U.S. crude rose to nearly $10 a barrel on Thursday, after falling below $8 on Tuesday, the lowest in months.

Bearish sentiment against WTI caused by rising U.S. crude inventories helped widen the spread, capping WTI’s gains, said Yusuke Seta, commodity sales manager at Newedge Japan in Tokyo.

U.S. crude oil inventories rose for a ninth straight week by 4.5 million barrels last week to 448.9 million, U.S. Energy Department data showed.

This was the highest level for this time of year in more than 80 years.

“Oil stocks are expected to rise further,” Seta said.

Any price gains could be short-lived as oil stocks are forecast to rise further due to refinery maintenance and the greenback could continue to strengthen against the euro, analysts said.

Potential supply disruptions, including escalating violence in Libya, where Islamist militants kidnapped nine foreign workers from oil fields on March 6, were the main bullish drivers of Brent’s strong price, Shum said.

The euro fell to a new 12-year low against the dollar on Thursday, while the dollar index also rose to 100.06 on Thursday for the first time since April 2003.

A strong greenback makes dollar-denominated goods more expensive for holders of other currencies and limits their purchases of goods and other assets.

(Editing by Tom Hogue and Prateek Chatterjee)