Oil prices rose for a fourth straight session on Monday, lifted by hopes that signs of economic slowing will prompt stimulus measures, especially in China, and by news a US Navy vessel off the United Arab Emirates fired on a fishing boat that failed to heed warnings.
Gains in September Brent crude outpaced those of the expiring front-month August crude contract, sharply reducing the premium of August to September that had blown out to more than $US1 because of North Sea production problems and tensions between the West and Iran.
The US Navy incident followed more tough talk over the weekend from Iran about shutting the Strait of Hormuz as Iran's dispute with the West over Tehran's nuclear program continues to keep the region and oil traders tense.
China's Premier Wen Jiabao, in remarks published on Sunday, said efforts to stabilise the economy are working and the government will step up efforts in the second half of the year to increase policy effectiveness and foresight.
"Prospects of more monetary easing are growing, supporting risk appetite - in China first, as the government takes policy measures to protect economic growth, but also in the US," said analysts at BNP Paribas.
Expiring front-month Brent August crude rose $US1.15 to settle at $US103.55 a barrel, having swung from $US102.07 to $US103.69. Brent September crude rose $US1.95 to settle at $US103.37 a barrel.
After closing above its 50-day moving average on Friday, front-month Brent's next key resistance is expected at $US103.74 - the 38.2 per cent Fibonacci retracement of the second-quarter retreat from the 2012 peak above $US128.
US August crude pushed up $US1.33 to settle at $US88.43 a barrel, above the US front-month crude 50-day moving average of $US87.21, after trading from $US86.41 to $US88.48.
Total crude trading volumes were relatively light, with both Brent and US crude turnover well below their 30-day averages.
Brent's premium to US crude slipped, ending at $US15.12 a barrel based on August settlements after reaching $US16.18 intraday.
Disappointing US retail sales data weighed on Wall Street and initially limited US crude gains, and both Brent and US contracts saw choppy trading.
The euro turned higher against the US dollar, and a weaker dollar index added support for dollar-denominated oil prices.
Oil prices rallied on Friday when China's second-quarter GDP figures, in line with expectations for slower growth, dispelled fears China was heading for a hard landing.
Hopes of fresh monetary stimulus from Western governments also were reinforced when the International Monetary Fund cut its global growth forecast for 2013 and urged European policymakers to act.
Investors awaited congressional testimony by US Federal Reserve Chairman Ben Bernanke on Tuesday and Wednesday for any hint of a third round of quantitative easing.
Iranian threats
One person was killed and three were injured on Monday when a US Navy ship fired at an approaching fishing boat off the United Arab Emirates, but officials did not immediately blame terrorism or cite an Iran link.
An Islamic Revolutionary Guard Corps (IRGC) naval commander said on Saturday that Iranian forces have the capability to prevent oil tankers from passing through the Strait of Hormuz, and Iran's parliament is considering a bill calling for the strait to be closed until sanctions against Iran are lifted.
"The price reaction to the news of the boat being fired on by the US Navy just shows how fragile the situation is considered to be," said Phil Flynn, analyst at Price Futures Group in Chicago.
The US Treasury department on Thursday exposed dozens of front companies, tankers and banks helping Tehran evade restrictions, attempting to ratchet up sanctions on Iran.
The measures underpin US and European Union sanctions designed to deprive Iran of oil revenue and pressure Tehran to curb its nuclear program, which Tehran maintains is solely for peaceful purposes.
Reuters
