Crude oil rises above $40 on Israel air strikes

Bloomberg

"The instability in the Middle East may well push oil prices higher," said Rob Laughlin, a senior broker with MF Global in London. "China’s plans to stockpile crude may take up some slack from the demand destruction from the economic slowdown."

Crude oil for February delivery rose as much as $4.49, or 12 percent, to $42.20 a barrel in electronic trading in New York. It was at $40.44 at 11:10 a.m. in London. Yesterday’s gain pares oil’s plunge from its $147.27 a barrel record on July 11 to 73 percent.

Dollar loses ground
Crude was supported yesterday as the U.S. dollar lost more than 2 percent against the euro, its biggest decline in more than a week, bolstering the appeal of dollar-priced assets used to hedge against inflation such as gold and oil. The U.S. currency traded for $1.4339 per euro at 11:09 a.m. London time.

Abu Dhabi National Oil, the United Arab Emirates’ state-owned producer, will reduce crude-oil exports in January and February after OPEC agreed to lower output. The Organization of Petroleum Exporting Countries agreed on Dec. 17 to trim daily production targets by 2.46 million barrels next month.

The Israeli air strikes killed more than 300 people, prompting protests across the region from Saudi Arabia to Syria.

Oil prices soared to a then-record $78.40 a barrel in July 2006 after Israel attacked Lebanon. At the time, Iran, the fourth-largest oil producer, was facing international sanctions.