Friday, January 6, 2012

Crude Oil Futures 8 month High: Iran Sanctions

Oil headed for a weekly gain in New York on signs that the U.S. economic recovery is gaining momentum and concern that tensions with Iran may lead to a disruption in Middle East exports.

West Texas Intermediate futures have advanced 3.4 percent this week. Hiring in the U.S. probably accelerated in December for a second month, pointing to a strengthening labor market heading into 2012, economists said before a report today. The European Union is working to halt oil purchases from Iran, said Victoria Nuland, a U.S. State Department spokeswoman. European foreign ministers aim to announce harsher penalties on the Persian Gulf nation’s energy and banking industries at a meeting Jan. 30, according to EU spokesman Michael Mann.

“The recent string of better-than-expected macroeconomic indicators from the U.S. has rebuilt some of the optimism and risk appetite,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “Iran has threatened to close the Strait of Hormuz, which would have an immense effect on the global oil market.”

Crude for February delivery was at $102.22, up 41 cents, at 10:04 a.m. London time. Yesterday, the contract fell $1.41 to $101.81, the lowest settlement this week. Prices gained 8.2 percent in 2011.

Brent oil for February settlement on the London-based ICE Futures Europe exchange rose 60 cents, or 0.5 percent, to $111.34 a barrel. The European benchmark contract was at a $11.12 premium to New York-traded West Texas Intermediate crude. The spread was a record $27.88 on Oct. 14.

Iran Sanctions

Brent’s premium has widened from $7.93 a barrel on Dec. 27 amid heightened tension over sanctions aimed at curbing Iran’s nuclear program. The country, the third-largest oil exporter globally, has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil.

Italian Prime Minister Mario Monti yesterday questioned the scope and timing of possible European Union sanctions against Iran, raising an obstacle to stiffer penalties.

Oil in New York may fall next week on concern that Europe will struggle to contain its debt crisis, a Bloomberg News survey showed. Fifteen of 32 analysts and traders, or 47 percent, forecast futures will decrease through Jan. 13. Fourteen predicted prices will rise.

“The bigger issues are the geopolitical crisis with Iran and the European debt crisis, pushing and pulling against the market,” said Anthony Nunan, a senior adviser for risk management at Mitsubishi Corp. in Tokyo, who described the U.S. stockpile data as bearish. “We had an overreaction to the upside and people are coming back to the reality that the European crisis will still be a big drag on the economy.”

U.S. Supplies

The Energy Department said yesterday U.S. crude stockpiles (DOESCRUD) climbed 2.2 million barrels last week. A decline of 1 million barrels was forecast in a Bloomberg News survey of analysts.

Gasoline stockpiles in the U.S., the world’s biggest oil consumer, rose 2.48 million barrels in the week ended Dec. 30, the Energy Department report also showed. Supplies were forecast (DOEASMGS) to gain 1 million barrels, according to the median estimate of 13 analysts surveyed by Bloomberg News. Distillate-fuel (DOESDIST) inventories, which include heating oil and diesel, were up 3.22 million barrels, more than three times the estimated increase of 1 million barrels.

Gasoline supplies in independent storage climbed to the highest level in almost six months in the European hub of Amsterdam-Rotterdam-Antwerp, according to PJK International BV. Stockpiles rose 14 percent to 706,000 metric tons in the week to yesterday, the researcher in Breda, Netherlands, said yesterday.

U.S. payrolls climbed by 155,000 workers after rising 120,000 the previous month, according to the median forecast of 84 economists surveyed by Bloomberg News. The unemployment rate rose after dropping in November to the lowest level in more than two years, the report may also show.

Retail sales in the euro zone dropped 0.8 percent in November, compared with a median forecast of 0.4 percent, and consumer confidence fell to the lowest in more than two years last month, in line with forecasts. A report later today may show factory orders in Germany, the Europe’s largest economy, slid 1.8 percent in November, a Bloomberg survey showed.

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