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UPDATE 3-Oil above $123 on economy hopes, Iran concern
March 1, 2012 / 9:56 AM / 6 years ago

UPDATE 3-Oil above $123 on economy hopes, Iran concern

* China’s factories grew more than expected in Feb

* Western sanctions already disrupting Iran oil exports-EIA

* Coming Up: U.S. initial jobless claims at 1330 GMT (Updates throughout, previous SINGAPORE)

LONDON, March 1 (Reuters) - Oil rose above $123 a barrel on Thursday as signs of economic growth in China and the United States bolstered the demand outlook and concern persisted about supply disruption from Iran.

A Chinese government survey on Thursday showed factories grew more than expected in February, following on from a report on Wednesday showing the U.S. economy grew faster than initially thought in the fourth quarter.

Brent crude rose 63 cents to $123.29 a barrel by 0950 GMT, rebounding from an earlier decline to as low as $122.49. U.S. oil was up 15 cents to $107.22.

“There are just too many geopolitical risk factors out there that are supporting oil,” said Tony Nunan, a risk manager at Mitsubishi Corp.

“On the other hand, a further correction cannot be ruled out because the market just went ahead of itself and there are concerns over demand as the euro zone is still not out of the woods.”

Brent posted a monthly gain of 10.5 percent in February and reached $125.55, its highest in 10 months, on Friday, supported by growing tension between the West and Iran about its nuclear programme and concern about cuts in its oil supply.

Prices fell earlier this week as technical indicators such as the relative strength index for Brent suggested the rally was overdone, and some participants still see signs that the rally is fragile.

“Technically, crude oil was saved in the last five minutes of the session but it still leaves crude oil in the danger zone given that it made lower highs and lower lows yesterday,” said Olivier Jakob, analyst at Petromatrix.

Supplies from Iran, the second-largest OPEC producer after Saudi Arabia, remain the key risk for the global market.

A U.S. government report said on Wednesday Western sanctions on Iran were already disrupting its oil exports, and further restrictions could tighten global oil markets.

U.S. and European insurance companies are declining to insure deliveries of Iranian oil even before the full Western sanctions go into effect, according to the report by the Energy Information Administration on Wednesday.

The risk of future disruption to supplies from Iran has pushed signs that actual supplies are ample, such as rising output from the Organization of the Petroleum Expoting Countries, onto the back burner.

U.S. crude oil stockpiles rose 4.16 million barrels last week, the EIA reported on Wednesday, a bigger increase than analysts expected which pressured U.S. crude. (Reporting by Alex Lawler in London and Manash Goswami in Singapore; editing by James Jukwey)

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