Brent crude remained above $112 per barrel today, gaining for a third straight day as hopes of oil demand growth during winter overshadowed concerns about the European debt crisis .
Low fuel inventories in the world's top oil consumer United States amid signs of an earlier-than-usual onset of winter may prompt refiners to ramp up output. That may further squeeze an already tight crude market coping with disruption in supplies from Libya and the North Sea.
"The tight supply situation is supporting the crude oil market, even though prices are being influenced by headline news out of Europe," said Natalie Robertson, an analyst at ANZ.
"Inventory levels are low and looks like we have an earlier-than-usual onset of winter." Brent crude gained 57 cents a barrel to $112.54 earlier. It settled $1.14 higher on Friday, rising for a second consecutive week.
US crude traded 9 cents higher at $94.35 a barrel. The contract increased 1 per cent last week, posting a fifth straight weekly gain.
Tens of thousands of homes remained in the dark on Sunday a week after a freak October snowstorm paralysed the US northeast and cut power to more than 3 million customers. In Connecticut, more than 112,000 Connecticut Light & Power customers were still in the dark.
Despite the cold spell in the United States, Brent prices have strengthened more than the US contract because supply tightness of grades linked to the European benchmark is more acute, Robertson said.
"We have had output issues with North Sea crudes," she said. "Libya is still not back up fully." US crude prices would rise towards $100 a barrel if they break past $95 due to supporting factors such as winter demand, said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo. The benchmark may rise close to $105 towards the end of the year.
Investors are also watching the unfolding bankruptcy of MF Global . CME Group and IntercontinentalExchange
moved over the weekend to limit the fallout from the MF Global bankruptcy on futures markets by lowering margin requirements on some accounts.
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