Oil prices jumped on Tuesday, snapping two sessions of losses, as escalating turmoil on the border of Turkey and Syria heightened concerns of a supply disruption in a tense Middle East.
International benchmark Brent gained more than 2 percent to top $114 a barrel for the first time since Sept. 18, when oil prices were coming off a rise to near $120 that had stoked worries high fuel costs could hurt the struggling global economy.
Ali al-Naimi, oil minister for top exporter Saudi Arabia and one of the officials most closely watched by energy markets, said the country was satisfied that oil prices had fallen to a level that would not hamper economic growth.
"Stability has been restored and oil prices returned to levels which are suitable to both the consuming and producing nations and to the global economy and its growth," Naimi told a meeting of Gulf Arab energy ministers. He later told reporters that the OPEC powerhouse would prefer to see oil prices closer to $100 a barrel. The International Monetary Fund, however, warned that the global economic slowdown is worsening, cutting its growth forecast for the second time since April.
U.S. crude led the oil complex higher, narrowing the contract's discount versus Brent to $22 a barrel after it hit $23.13, the widest level since October 2011. Delays in Forties cargoes, one of the four benchmark North Sea streams, have helped support Brent over U.S. crude.
Brent November crude settled up $2.68 at $114.50 a barrel, pushing through the 200-day moving average of $112.18 and the 50-day moving average of $112.68, key technical levels monitored by chart-watching traders.
U.S. November crude gained $3.06 to settle at $92.39 a barrel, moving back above the 100-day moving average of $89.86.
U.S. RBOB gasoline futures rose 2.3 percent and heating oil futures gained 1.9 percent, as low U.S. inventory levels and unplanned refinery outages stirred supply concerns.
"Oil product inventories are also an issue for the market," said Tim Evans, energy analyst at Citi Futures Perspective, commenting on why U.S. crude prices outpaced Brent's rise in midday trading in New York.
"Gasoline inventories nationally are barely above the level of September the 21st, which was the lowest since October 2008." Ahead of weekly inventory data from the American Petroleum Institute and the U.S. Energy Information Administration,
analysts polled by Reuters forecast a 1-million-barrel build in crude stockpiles for the week to Oct. 5, a 300,000-barrel draw in distillate inventories and a 200,000-barrel build in gasoline stocks.
The API report will be released on Wednesday and the EIA data on Thursday, delayed one day by the Columbus Day holiday.
MIDDLE EAST TENSIONS
Oil markets have been balancing delays in shipments from the North Sea and the risk of supply disruptions in the Middle East against worries over fuel demand in recent weeks.
NATO has plans to defend Turkey against attack from Syria, and will aim to provide assistance if Ankara asks for it. NATO ambassadors threw their support behind Turkey in an emergency meeting last week after Syrian shells struck a border town in Turkey, killing five civilians.
"It's a political risk premium coming into the market now, not really supported by fundamental data," said Andy Sommer, oil market analyst with EGL in Switzerland.
"If you look at the demand side, prices should be a bit lower than they are currently. But the risk, or fear, that this Turkey-Syria conflict might spread further in the Arab world is increasing that risk premium."
The market was also watching news Iraq, OPEC's second-biggest producer after Saudi, was raising supplies. Exports this month are expected to rise above 2.8 million barrels per day, the highest in decades, and efforts are under way to more than double output by 2020.
(Additional reporting by Peg Mackey and Alice Baghdjian in London and Ramya Venugopal in Singapore; Editing by Marguerita Choy, Sofina Mirza-Reid and Dale Hudson)