Oil up above $107 on stock draws, Iran

Oil prices rose to more than $107 a barrel on Thursday, helped by bigger-than-expected stock draws in the United States and tensions around Iran, but a lack of progress at a European summit on the euro zone debt crisis tempered gains.

Brent crude oil futures rose 72cents to $107.74 a barrel at 1625 GMT after pushing up over $1 to an intraday high of $108.09.

U.S. crude was up 82 cents at $96.99 a barrel after earlier touching $97.18. But traders said volumes were thin as the U.S. market is closed for the Thanksgiving holiday.

"We're due for a pretty quiet couple of days - the markets won't stray too far ... we are more likely to see a narrower trading range," said Tony Machacek, a trader at Jefferies Bache.

Crude stockpiles in the United States unexpectedly fell week-on-week by 6.2 million barrels as refinery rates rose and crude imports dropped , the Energy Information Administration said on Wednesday. The consensus forecast was for a 500,000 barrel build.

"Oil is benefiting from the EIA inventory report which showed a surprisingly sharp draw in U.S. crude oil stocks, which have fallen below the five-year average for the first time this year," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

"As we head into winter with the lowest stocks in several years on crude and heating oil/distillates this is keeping a floor under the prices," agreed Michael Poulsen, oil analyst at Global Risk Management.

More positive economic data from Germany helped offset some of the negative sentiment generated by Wednesday's failed bond auction but markets were disappointed by the lack of progress at a French-German-Italian summit.

The closely-watched German IFO business climate index bucked expectations to rise for the first time since June. But at the three-way eurozone talks, leaders said they would make no demands on the European Central Bank.

Instead, French President Nicolas Sarkozy, who has been pressuring Berlin to let the ECB act more decisively, said proposals to modify EU treaties would be presented ahead of a December 9 EU summit.

These modifications will seek to improve eurozone governance and ramp up economic policy convergence, but are being seen as a trade off for a stronger ECB role.

"There has been no progress," said Christophe Barret, global oil analyst at Credit Agricole CIB.

Given the negative economic backdrop, Fritsch said oil prices had held up reasonably well.

"I would have expected them to come under a lot more pressure," he said. "But tighter supplies and geopolitical risk regarding Iran are helping prices stay elevated."

MIDDLE EAST TENSIONS

France created some confusion in the oil market by saying it could impose a unilateral ban on Iranian crude oil imports but then backtracking on the comments.

Analysts said a unilateral ban would have little impact, and did not expect other Western powers to follow suit given the current tightness in oil markets.

France is also seeking Arab support for a humanitarian corridor in Syria, the first time a major power has swung behind international intervention in the eight-month uprising against President Bashar al-Assad.

Meanwhile, in Saudi Arabia, two people have been killed and three wounded in an exchange of fire between Saudi security forces in the oil-producing Eastern Province and what the interior ministry called gunmen serving a foreign power.

But there were further signs that Libyan output was picking up pretty quickly following the end of the civil war, with its Mellitah Oil and Gas Company restarting production from the offshore Bouri field at a rate of 10,000 barrels per day.

The National Oil Corporation also issued a tender to sell up to one million barrels of Sharara grade crude oil, the first for this grade since production resumed.

Source: REUTERS