Oil Rises Above $117 Ahead Of ECB Meeting

Oil rose above $117 a barrel on Thursday as traders awaited word from the European Central Bank that could confirm speculation the region’s troubled economy was turning a corner.

Brent has steadily risen over the past three weeks as positive economic data in key economies boosted the outlook for oil consumption, while simmering tensions in the Middle East have led to supply concerns, further supporting prices.

March Brent futures were trading up 55 cents at $117.28 per barrel at 0917 GMT, the highest level since mid-September, while U.S. crude added 15 cents to $96.77.

Investors were waiting for European Central Bank (ECB) President Mario Draghi’s views on the region’s economy at a news conference at 1330 GMT following the body’s policy meeting.

“The European Central Bank (ECB) press conference today will be very important for overall sentiment over the euro zone,” Bjarne Schieldrop, an analyst at SEB, said.

Brent’s strong backwardation, when front-month prices are higher than those in the future, are providing further support to the benchmark as they offer attractive rollover yields to investors, Schieldrop said.

“The backwardation is an expression of a tight physical market, which explains why Brent has been gaining ground.”

Oil markets have been drawing comfort in recent weeks from signs the euro zone economy may have neared its lowest point, while the economies of top oil consumers United States and China have signalled pickups in activity.

The Chinese economy ended seven straight quarters of slowing growth in the fourth quarter by growing 7.9 percent while the U.S. services sector extended a three-year expansion in January and the employment index hit a seven-year high.

Markit’s Eurozone Composite PMI, based on business activity across thousands of companies, and a good gauge of economic growth, rose in January to a 10-month high of 48.6 from 47.2 in December.

Still, investors have been speculating about leadership uncertainties in Spain and Italy and watching for comments from European leaders as well as the outcome of the ECB meeting.

Increasing unrest in Syria and Tunisia are further supporting oil prices as investors fear supply disruptions in the Middle East, the world’s largest oil producing area.

Worries about supply escalated after Tunisia’s ruling Islamists dissolved the government to calm street riots, bringing back memories of the Arab Spring revolts that shook the region two years ago.

Tunisia is located between major oil producers Algeria and Libya. Adding to worries was Syria’s ongoing struggle to end a two-year old conflict and violence in Egypt that killed 59 people last month.

“Geo-political tensions will keep the heat under the market,” said Tony Nunan, an oil risk manager at Mitsubishi Corp.

U.S. crude was also under pressure after data showed rise in oil inventories. Crude stocks rose to 371.7 million barrels last week and have been building to near-record seasonal highs. The builds have come in part due to higher domestic oil production, which has risen to near 18-year highs.