Oil prices were slightly lower in early afternoon trade, but holding on to the highest level seen for almost two months, propped up by the same factors that caused a strong spike yesterday: strong ecoonomic data and tensions between Iran and the West.
A few days ago, Iran ended naval manoeuvres in the Strait of Hormuz, a bottleneck for oil shipments from the Persian Gulf, with tests of short-range missiles and a warning to an US carrier task force not to return to the Persian Gulf from exercises in the Gulf of Oman.
While this continues to be viewed as the usual sabre-rattling from Iran which faces stiffening Western opposition to its nuclear programme, the uncertainty helped keep oil prices at its record levels.
Positive manufacturing data from China published last weekend was followed by US and German data that point to stronger economic activity in these major economic powerhouses, with market participants hoping for an ensuing stronger demand for oil.
US manufacturing grew at its fastest pace in six months over December 2011, while construction activity in November reached near 1-1/2-year highs.
Concerns over the euro zone economy were eased somewhat by data from the bloc’s biggest economy, Germany, showing a strengthening purchasing managers’ index for December.
German PMI was adjusted higher to 48.4 from the previous estimate of 48.1, and up from November’s reading of 47.9 points.
Reuters cited an analyst as saying: "The economy news is stronger, the German PMIs were stronger, and Iran is keeping us on our toes."
US light, sweet crude for February delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), dipped 0.5 percent to US$102.46 a barrel in morning trade in New York.
February Brent crude was 0.129 percent lower at 111.99 on the ICE Exchange this afternoon.
Today’s top risers in the oil and gas sector were:
Petro Matad (LON:MATD) up 17.4 percent at 29.5 pence
Serica Energy (LON:SQZ) up 10.4 percent at 21.25 pence
New World Oil and Gas (LON:NEW) up 10.1 percent at 10.88 pence
Circle Oil (LON:COP) up 6.6 percent at 22.13 pence
Volga Gas (LON:VGAS) up 6.5 percent at 82 pence
Top fallers were:
Caspian Holdings (LON:CSH) down 8.9 percent at 0.26 pence
Nostra Terra Oil & Gas (LON:NTOG) down 7.9 percent at 0.41 pence
Xtract Energy (LON:XTR) down 5.6 percent at 2.13 pence
Leed Petroleum (LON:LDP) down 4.8 percent at 0.20 pence
Ascent Resources (LON:AST) down 4.4 percent at 2.73 pence