Oil prices rise on Iran-led drone attack

SINGAPORE Reuters - Oil prices climbed in early Asia trade on Monday, supported by tensions in the Middle East following a drone attack in Iran and as Beijing pledged over the weekend to promote a consumption recovery that would support fuel demand.

The price of crude futures rose 54 cents, or 0.6%, to $87.20 a barrel by 0115 GMT, while the price of U.S. West Texas Intermediate crude was at $80.22 a barrel, up 54 cents, or 0.7%.

Israel appears to have been behind an overnight drone attack on a military factory in Iran, a U.S. official said on Sunday.

Stefano Grasso, a senior portfolio manager at 8 VantEdge in Singapore, said it was not really clear what is happening in Iran, but any escalation there has the potential to disrupt crude flow.

Ministers from the Organization of the Petroleum Exporting Countries OPEC and allies led by Russia are unlikely to change its current oil output policy when they meet virtually on February 1.

There was a spike in crude exports from Russia's Baltic ports in early February that caused Brent and WTI to post their first weekly loss in three weeks.

State broadcaster CCTV reported on Saturday that China's cabinet would promote a consumption recovery as the main driver of the economy and boost imports.

We have Russia on the supply side and China on the demand side. Both can swing by more than 1 million barrels per day, above or below expectations, said Grasso, formerly an oil trader with Italy's Eni.

China seems to have surprised the market in terms of how fast they are coming out of zero COVID, while Russia surprised in terms of resilience of export volume despite the sanctions. After its Lunar New Year holidays, China resumes business this week. The number of passengers travelling before the holidays went above levels in the past two years but is still below 2019, according to a note from the Ministry of Transport.

International traffic recovery remains gradual, with high-single to low-teens digits to 2019 level, and we expect further recovery when outbound tour group travel resumes on February 6, according to the Citi note.