UPDATE 11-Oil ends up as pre-holiday covering offsets Gaza truce

Thu Nov 22, 2012 1:54am IST

Rajalakshmi (C), 28, smiles after winning the Miss Wheelchair India beauty pageant in Mumbai November 26, 2014. REUTERS/Danish Siddiqui

Miss Wheelchair India

Seven women from across India participated in the country's second wheelchair beauty pageant, which aims to open doors for the wheelchair-bound in modelling, film and television, according to organisers  Slideshow 

* Egypt announces Gaza truce from 1900 GMT

* Drop in U.S. crude, fuel stocks offers limited support

* Trade begins to thin ahead of U.S. Thanksgiving holiday (Recasts, adds closing prices, adds byline)

By Jonathan Leff

NEW YORK, Nov 21 (Reuters) - Oil ended higher after thin, volatile trading on Wednesday, as late-day short-covering ahead of a U.S. holiday offset earlier relief over a ceasefire that ended eight days of fighting in the Gaza strip.

While U.S. financial markets drifted quietly toward Thursday's Thanksgiving holiday, oil prices were whipsawed between fears of a deepening conflict between Israel and Hamas and hope for a ceasefire. Volatility was exacerbated by subdued oil market activity, with turnover about a third below average.

Prices rose by more than $1.50 a barrel early in the day after an explosion on a Tel Aviv bus. But a truce announced at midday eased concerns that a week of intensive Israeli fire on the Gaza Strip and militant rocket attacks out of the enclave could widen, engulfing regional oil exporters.

U.S. government data showing an unexpectedly large drop in weekly fuel stockpiles -- as well as modestly upbeat economic indicators -- gave an early boost to gasoline and heating oil prices, which outperformed crude. But ultimately it was too little to offset a sense of pre-holiday malaise.

"I'm seeing the market's pulse become fainter and fainter," said Tim Evans, energy analyst for Citi Futures Perspective in New York. "I think some traders are just getting an early start on the Thanksgiving holiday rather than putting on risk or even reacting to the headlines."

The current Middle East turmoil is more likely to be a "limited conflict" similar to the war with Hezbollah in July 2006 than a wider, more prolonged one, Evans said.

Brent crude futures gained $1.03 or 0.9 percent to settle at $110.86 a barrel, bouncing off a midday low of $109.55 barrel shortly after the Gaza truce was announced. Trading volume of around 400,000 lots was a quarter below the average.

U.S. crude oil futures rose 63 cents or 0.7 percent to settle at $87.38 a barrel on Wednesday, about 50 cents below the session high. Benchmark gasoline and heating oil futures each rose by more than 1 percent.

Egyptian Foreign Minister Mohamed Kamel Amr announced that a ceasefire would come into force at 9 p.m. (1900 GMT), halting a conflict that has killed more than 140 Palestinians and five Israelis. U.S. Secretary of State Hillary Clinton said Egypt was assuming "responsibility, leadership" in the region.

Israeli Prime Minister Benjamin Netanyahu told U.S. President Barack Obama he was ready to give the ceasefire a chance, but that "more forceful action" might be needed if it failed, according to a statement from his office.

FUNDAMENTAL REFOCUS

Although little oil is produced in Israel, concern that major hydrocarbon producing Arab nations could become involved in the conflict has aroused fears that supplies from the Gulf can be disrupted.

If the truce holds, however, focus may return to the market's moribund underlying fundamentals. Euro zone finance ministers ended a meeting in Brussels on Wednesday without agreement on the next tranche of loans to Greece.

"The Middle East tensions could continue to give prices some life in the near term but we suspect that bearish economic factors will be dominant," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

And U.S. economic data offered limited cause for hope. Manufacturing grew in November at its quickest pace in five months and new jobless claims dropped, but consumer sentiment showed only a marginal improvement.

STOCKS DRAW

U.S. crude and refined product stocks fell last week as plants processed more crude and imports dropped, data from the U.S. Energy Information Administration showed.

Total U.S. crude oil inventories fell 1.47 million barrels in the week to Nov. 16 to 374.47 million barrels, after analysts polled by Reuters had forecast a build of 900,000 barrels.

U.S. inventories of distillates, which include diesel and heating oil, fell 2.68 million barrels to 112.84 million barrels, compared with forecasts for a smaller, 1.4-million-barrel drawdown. Along the East Coast, distillate inventories fell 1.63 million barrels to the lowest levels since May 2008.

"The fall in inventories comes on the back of improving demand and continued high levels of exports," analysts at Energy Aspects said in a report. More cold weather in the Northeast is likely to deepen the deficit in regional fuel stocks. (Additional reporting by Simon Falush and Shadia Nasralla in London, Jessica Jaganathan in Singapore; editing by William Hardy, Keiron Henderson, Marguerita Choy, Leslie Gevirtz and Bob Burgdorfer)

SAARC Summit

REUTERS SHOWCASE

E-Commerce Boom

E-Commerce Boom

Online grocers come up trumps in India's e-commerce boom   Full Article 

Reuters Poll

Reuters Poll

GDP growth to slow to 5.1 pct, but no rate cut yet  Full Article 

Oil Prices Fall

Oil Prices Fall

Oil at four-year low as OPEC production cut looks unlikely  Full Article 

Hughes Dies

Hughes Dies

Australia batsman Hughes passes away aged 25  Full Article 

Google in Europe

Google in Europe

Insight - Behind Google's Europe woes, American accents  Full Article 

India-focused Funds

India-focused Funds

India-focused hedge funds up over 40 pct YTD - HFR  Full Article 

Trade Deal

Trade Deal

WTO postpones trade deal by a day after last-minute objection.  Full Article 

Land Disputes

Land Disputes

Disputes over land for industry on the rise in India, angering locals - charities  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage