BUSINESS

Oil prices rise to near US$100 on supply worries despite weak US economic data

12/23/2011 01:31 EST | Updated 02/22/2012 05:12 EST
NEW YORK, N.Y. - Oil prices were near US$100 a barrel Friday as worries over global security issues outweighed weak economic data in the U.S.

In afternoon trading benchmark crude rose 29 cents to $99.82 per barrel in New York.

Tensions between Iran and western nations, along with unrest in Syria, Bahrain, Kazakhstan and Iraq have raised worries that oil supplies could be disrupted if the unrest spreads or grows more serious.

While none of those situations has disrupted oil supplies yet, traders say it is too dangerous to sell oil or bet that oil prices will fall with tensions so high near so many important oil-producing regions. Even small disruptions in oil supplies can send prices dramatically higher.

Among the biggest concerns is Iran, the world's fourth biggest producer of crude. The U.S. and Europe may tighten sanctions against Iran over the West's fear that Iran is trying to build a nuclear bomb. Also, Iraq is expected to become the fastest growing producer in the Middle East in the next several years as it recovers from war and tries to tap its enormous reserves of oil. But a surge in violence there since the U.S. withdrew troops is raising concerns that Iraq won't be able to increase production as fast as hoped.

"Iran might not passively wait for sanctions to be applied and could act unilaterally to embargo supplies," J.P Morgan said in a report. "We are also concerned about Iraq, where political uncertainties seem to be rising following the U.S. troop pullout."

Traders also say they expect European financial authorities to increase the flow of money in the regional economy to try to slow or stop the region's slide into recession. Investors tend to buy commodities such as oil when more money becomes available, raising their prices.

Economic data in the U.S. has been mostly positive this week, which helped propel oil to four straight days of gains. Demand for oil and gas grows with the economy as shippers move more goods and consumers drive and fly more.

Jobless claims fell and housing construction increased. But the Commerce Department reported on Friday that consumer spending and incomes were growing at a very weak pace, suggesting continued sluggish economic growth.

Trading volume is normally low during the last week of the year, as many traders vacation around the Christmas and New Year's Day holidays. Global oil markets are closed Monday for Christmas.