Futures rose as much as 0.8 percent after European governments and the International Monetary Fund extended an aid- package to debt-strapped Ireland. Prices also rose as North Korea warned its confrontation with South Korea could lead to war. South Korean President Lee Myung Bak vowed to make the country pay for any further provocations.
“Today’s upward tone seems to be based on a relief rally from the Irish bailout,” said Serene Lim, an energy strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “That’s adding to the positive sentiment in the market.”
The January contract climbed as much as 70 cents to $84.46 a barrel in electronic trading on the New York Mercantile Exchange and was at $84.30 at 2:41 p.m. Singapore time. Prices are up 6.1 percent this year.
The contract traded at $84.53 a barrel on Nov. 26, the highest in ten days, before closing at $83.76, down 0.1 percent.
Crude rose after the EU handed an 85 billion-euro ($113 billion) bailout to Ireland and told Greece it could have an extra four-and-a-half years to repay emergency loans to match the seven-year term under Ireland’s deal.
Escalating Tension
“Greece and Ireland are now under the stewardship of the European Union and the IMF and potentially before the end of the year Portugal will be in the same situation,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney. “There’s also the potential for conflict between North Korea and South Korea. There’s a little bit of nervousness in the market.”
South Korean President Lee Myung Bak vowed to make Kim Jong Il’s regime pay for military attacks as China sought talks to defuse tension on the Korean peninsula.
North Korea “will deal a merciless military counter-attack at any provocative act of intruding into its territorial waters,” according to a Rodong newspaper commentary carried yesterday by the North’s official Korean Central News Agency.
North Korea on Nov. 23 shelled a South Korean fishing community and military base with highly inflammable ammunition that killed four people.
Brent crude for January settlement rose as much as 0.7 percent, or 62 cents, to $86.20 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 0.6 percent Nov. 26 to end the session at $85.58.
Traders are increasing bets that oil will reach $100 next year on signs of falling inventories and a reduction in spare output capacity.
The price of options to buy December 2011 futures at $100 a barrel jumped 14 percent on Nov. 24, the largest one-day gain in three months, according to data compiled by Bloomberg. So-called open interest for the contract has risen 51 percent this year to 45,424 lots, the highest for any crude option on the New York Mercantile Exchange.
The increase in trading of $100 options shows some investors anticipate oil will rise at least 19 percent to levels last reached in 2008.
