NEW YORK (Reuters) – Oil rose on Friday on U.S. supply concerns, the slumping dollar and mounting tensions in Pakistan and northern Iraq.
U.S. crude traded up 23 cents to $96.85 a barrel by 1705 GMT. London Brent gained 12 cents to $94.90 a barrel.
A U.S. government report on Thursday showed unexpectedly large draws in crude and distillate inventories in the world’s top consumer. U.S. crude inventories are now at their lowest level in nearly three years, adding to winter supply worries that helped push oil to nearly $100 in November.
“Escalating geopolitical tensions, tightening oil supplies and a weakening dollar would seem to stack the deck in favor of further upward movement,” said Mike Fitzpatrick, vice president at MF Global.
The assassination of Pakistani opposition leader Benazir Bhutto on Thursday stoked geopolitical concerns, although Pakistan is not a major crude producer and unrest is unlikely to directly affect oil flows.
“The Bhutto story will keep being a factor into next week, and it should help keep a floor under the market, along with the other geopolitical uncertainties,” said a New York broker.
The Bhutto assassination also triggered a flight to less risky assets such as gold, which rose to a one-month high, and prompted a further drop in the dollar.
The dollar fell again on Friday as data showing a 9 percent decline in sales of new U.S. homes last month heightened concern about the economy, putting the greenback on track for its worst week in more than a year.
The falling dollar has pushed up prices for commodities denominated in the U.S. currency this year by raising the purchasing power of non-dollar nations and reducing the spending power of producer revenues.
Oil has rallied more than 58 percent since the start of the year, hitting a record $99.29 on November 21, although the credit crisis and forecasts for above average temperatures this winter have raised concerns about U.S. demand.
Turkish raids on Kurdish guerrilla targets in northern Iraq have also supported prices by raising the risk to regional supply, although most of the OPEC nation’s oil exports flow via its southern ports.