Oil climbed above $100 a barrel on Tuesday in Asia after Saudi Arabia, the world’s largest exporter of the commodity, indicated it thinks prices should be maintained around that level.
Benchmark crude for February delivery was up $1.94 at $100.63 a barrel at mid-day Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The oil market in the U.S. was closed on Monday for a holiday.
Oil prices rose after Saudi Oil Minister Ali al-Naimi told CNN that Saudi Arabia wanted to stabilise prices at $100 a barrel this year and was ready to pump more oil if needed, said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
But the Minister’s comments also raised new tension as Iran has warned Gulf nations not to make up any shortfall due to U.S.-led sanctions that are hampering its crude exports, Mr. Shum said. Iran has warned it would respond to an embargo by shutting the Strait of Hormuz which is used to transport about a fifth of the world’s oil.
“There is more upside to oil pricing primarily because of geopolitical supply side concerns,” Mr. Shum said.
Crude’s gains were in sync with Asian stock markets after a successful bond auction by France eased jitters over Europe’s debt crisis after Standard and Poor’s downgraded the government debt of nine countries that use the euro, he said.
Mr. Shum said Europe’s continuing crisis would spark volatility in oil prices but predicted crude could stay above $100 a barrel in the medium-term. Slowing growth in China, a major oil consumer, could also dampen sentiment, other analysts said.
The world’s second-largest economy grew 8.9 per cent in the last quarter of 2011, the weakest expansion since mid 2009 but still robust enough to suggest the country will avoid an abrupt slowdown.