Brent Surges On Geopolitical Worries

Brent crude oil surged on Wednesday morning as geopolitical tension revived supply interruption fears and positive data injected some positivism into the market. The commodity traded at $104.91 at 6:00 GMT as investors waited for data which would confirm a drop in US stockpiles.

According to Reuters, US crude inventories shrank by 9.4 million barrels for the week ending on June 28th. The report was a welcome surprise to analysts who had predicted a fall of just 2.3 million barrels. Now investors are waiting for a statistical report from the Energy Information Administration, which could verify the drop. The report is due out later on Wednesday.

Also lending support to Brent prices is ongoing conflict in the Middle East and Africa. After protesters in Libya shut down some of the nation's oil fields and reduced its output by a third, investors are keeping a close eye on conflict in the region for any indication of further supply interruptions.

The Egyptian government is teetering on the edge of collapse as opponents of President Mohamed Morsy gave him an ultimatum which he declined to accept. In the late hours of Tuesday night, a bloody clash between Morsy's supporters and opponents at Cairo University ended with reports of 16 dead and 200 wounded. The nation's ongoing conflict has many worried that it could destabilize the entire region.

Gains were capped by another string of weak Chinese data which confirmed worries about the number two oil consumer's future demand. China's services sector grew very slowly in June, with data showing it was moving at its slowest pace in nine months.

BY Laura Brodbeck