(Recasts with Iran-U.S. tensions, updates prices)
By Santosh Menon
LONDON, Jan 7 (Reuters) - Oil rose above $98 a barrel before
falling back on Monday as reports of rising tensions in the
Middle East outweighed concerns of demand outlook in top
consumer United States from a feared economic recession.
CNN reported that five Iranian Revolutionary Guard boats
harassed and provoked three U.S. Navy ships in the Strait of
Hormuz on Saturday.
Citing unidentified U.S. officials, CNN said the Iranian
vessels came within 200 yards (metres) of the U.S. ships and
that after a threatening radio communication, U.S. sailors
manned their ships' guns and were very close to opening fire.
Relations between the two countries are already tense over
Iran's nuclear programme.
Traders said the news had helped put the focus back on
geopolitical risks in the oil market.
"Crude rallied 60 cents on the news," Addison Armstrong,
analyst at TFS Energy wrote in a report.
U.S. light crude for February delivery <CLc1> rose 14 cents
to $98.05 a barrel by 1407 GMT, off lows of $97.11 hit earlier
during the session. Oil had fallen by $1.27 on Friday.
London Brent crude <LCOc1> was 44 cents up at $97.23.
Oil has eased from a record peak of $100.09 a barrel last
Thursday after a government report showed the U.S. unemployment
rate up 5 percent in December, its highest in more than two
years.
The bleak unemployment report was the latest signal that top
energy consumer the United States could fall into a recession
later this year.
U.S. ECONOMY
"Concerns about the U.S. economy are clearly putting some
pressure on oil prices. Some market players are also using this
opportunity to take profits," said Gerard Burg, a resource
analyst from the National Bank of Australia.
Burg said that while OPEC rumblings over the weekend had not
given any clear signal on what action the group might take at
its next meeting, there were growing expectations that it would
increase output to rein in prices.
Saudi Oil Minister Ali al-Naimi said on Sunday that the rise
in oil prices had been determined by market forces, but declined
further comment on what action the Organization of Petroleum
Exporting Countries (OPEC) would take at its next meeting on
Feb. 1 in Vienna. []
Separately, OPEC president Chakib Khelil said on Saturday he
expected oil prices to keep rising during the first quarter of
this year before stabilising in the following quarter
[].
Goldman Sachs, the most active investment bank in energy
markets, also believes oil will stay strong and has kept its
average 2008 price forecast unchanged at $95.
"We maintain that the combination of tighter short-term
fundamentals and escalating costs will continue to provide
strong support to oil prices in 2008, with the risk skewed to
the upside from current levels," it said.
Crude speculators on the New York Mercantile Exchange
boosted net long positions to a near two-month high in the week
ended Dec. 24, the Commodity Futures Trading Commission said on
Friday.
The increase in bullish sentiment came just before oil
prices hit last week's peaks.
(Additional reporting by Fayen Wong in Sydney, Randy Fabi in
London and Robert Gibbons in New York; Editing by James Jukwey)
