Oil rises to $117 on Russia-US tension

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Oil rises to $117 on Russia-US tensionOil falls by more than $1 to below $112Fall in oil likely to be moderate: ICRA'Supply crunch may bring $200 oil in 5-10 yrs'

London, August 21:: Oil rose to $117 a barrel on Thursday, climbing for a third straight session, as Washington's missile shield deal with Poland angered Russia, adding to international tension.

The spat adds to political factors that have supported oil prices in recent months, such as the dispute over Iran's nuclear work. A weaker dollar also boosted the appeal of commodities as an inflation hedge.

"There's a myriad of geopolitical factors rumbling in the background -- Russia, Iran," said Tony Machacek, broker at Bache Commodities Ltd. "Also, the dollar is weaker."

US crude gained $1.64 to $117.20 a barrel by 1105 GMT, having risen as high as $117.44 earlier in the session. Brent crude climbed $1.47 to $115.83.

The United States and Poland signed a deal on Wednesday to station parts of a US missile defence shield on Polish soil, drawing a sharp response from Russia, the world's second-largest oil exporter.

The pact comes as relations between Russia and the West have been strained by Moscow's military intervention in Georgia. The conflict there has disrupted the transit of Azeri oil through Georgia.

International tension outweighed a US government report that on Wednesday showed crude inventories rose by 9.4 million barrels, the largest weekly increase since March 2001.

Oil has fallen from a record high of $147.27 a barrel reached last month on evidence that demand is slowing. Prices remain up about 15 per cent so far this year and have climbed from below $20 in early 2002.

Also supporting the market were expectations that the Organization of the Petroleum Exporting Countries and Saudi Arabia, its top producer, may decide to trim supply in a bid to stem a further price fall.

Saudi Arabia boosted oil output in July to 9.7 million barrels a day from 9.45 million bpd in June, far above the country's informal OPEC target. OPEC meets on Sept. 9 to review output policy.