Brent crude prices rose to near $100 a barrel on Tuesday as Egypt's political turmoil kept alive concerns about potential supply interruptions, while U.S. crude prices ended lower after a volatile session.
Egyptians staged one of their biggest protests yet, demanding President Hosni Mubarak step down now, their intent undiminished by the vice president's announcement of a plan to transfer power.
Crude oil prices on both sides of the Atlantic bounced after being pressured early when China moved to tame inflation with an interest rate increase, the second in just over six weeks, that revived concern about oil demand growth easing.
U.S. crude futures were lifted intraday on crude supply disruptions in the United States and Colombia and as gasoline futures rallied on refinery outages. U.S. crude's weakness came ahead of weekly inventory reports expected to show domestic stockpiles rose last week.
In London, ICE Brent crude for March rose 67 cents to settle at $99.92 a barrel, having reached $100.42.
U.S. crude oil for March delivery fell 54 cents to settle at $86.94 a barrel.
Even with the price volatility, Brent's premium against U.S. benchmark West Texas Intermediate crude hit a record high above $13 a barrel, surpassing the previous record of $12.72 from Jan. 16, 2009, according to Reuters data.
Strikes by workers at companies in the Suez Canal zone will not affect the canal operations and movement of ships, a senior canal official told Reuters, but the worker dissatisfaction reinforced the remaining potential for the region's unrest to cause oil supply disruptions.
Saudi Arabia increased production in November and December, according to a report from the U.S. Energy Information Administration, which added to price volatility and helped cool U.S. crude prices, analysts and brokers said.
U.S. gasoline futures rose nearly 2 per cent, getting lift from news that Valero Energy Corp shut down a gasoline-making unit at its 287,000 barrels-per-day refinery in Port Arthur, Texas.
Gasoline futures rose, despite U.S. retail gasoline demand slumping as a massive snowstorm curbed demand.
U.S. crude inventories were expected to have risen for a fourth consecutive week, by 2.4 million barrels, according to a Reuters survey of analysts on Tuesday.
Distillate stocks, including heating oil and diesel fuel, were expected to have fallen, while gasoline stocks built.
The industry group the American Petroleum Institute was to release weekly inventory data at 4:30 p.m. EST on Tuesday.
CHINA INTEREST RATE HIKE
Crude oil prices on both sides of the Atlantic fell intraday after China moved to tame inflation with an interest rate increase, the second in just over six weeks.
Copper prices also slumped on the news before ending firmer as investors decided Chinese demand for oil and industrial metals would continue despite the efforts of the government to cool stubborn inflation.
Gold rose 1 per cent Tuesday to its highest in nearly three weeks on inflation fears and a technical breakout after breaching key resistance at a 100-day moving average.
A rise in Chinese interest rates for the second time in just over six weeks benefited gold's status as an inflation hedge, even as the move initially prompted selling in the metal along with industrial commodities.
Gold was trying to restore upward momentum after gaining more than 4 per cent in the past 10 days, withstanding fading safe-haven demand as U.S. equities rallied to mid-2008 highs and U.S. Treasury bond yields rose for a seventh straight session on inflation worries.
Gold prices spiked after rising above the 100-day average in New York's morning session, triggering technical buy-stops and short-covering, traders said.
"Gold has continued its uptrend since it has broken above its down trendline from the January high, and it has gotten through the 20-day moving average which was held for several days," said Rick Bensignor, chief market analyst at investment bank Dahlman Rose.
Spot gold rose 0.9 per cent to $1,362.90 an ounce by 2:58 p.m. ET.
U.S. gold futures for April delivery settled up $15.90, or 1.2 per cent, an ounce at $1,364.10. Trading volume was about 40 per cent below its 30-day average, in line with weaker turnover in the last several sessions.