Bloomberg News

Oil Gains as Equities Rebound and EU Considers Iran Import Ban

December 06, 2011

Dec. 6 (Bloomberg) -- Oil climbed to a three-week high in New York after equities rebounded and tension grew between the West and Iran over the Persian Gulf nation’s nuclear program.

Crude rose 0.3 percent as stocks advanced on a Financial Times report that the European Union was in talks to double the size of its rescue fund and EU Energy Commissioner Guenther Oettinger signaled the bloc may have agreed to ban oil imports from Iran. Prices retreated earlier as Standard & Poor’s said it may cut European credit ratings.

“There’s been a strong correlation between stocks and the oil market recently,” said Kyle Cooper, director of research for IAF Advisors in Houston. “Both oil and the stock market are waiting for signs of a resolution to the European debt crisis.”

Crude oil for January delivery rose 29 cents to $101.28 a barrel at on the New York Mercantile Exchange, the highest settlement since Nov. 16. Futures are up 11 percent this year.

Prices were little changed from the settlement after the industry-funded American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil inventories fell 5.04 million barrels to 334.1 million last week. January oil was up 16 cents to $101.15 a barrel in electronic trading at 4:34 p.m.

Brent oil for January rose $1, or 0.8 percent, to end the session at $110.81 a barrel on the London-based ICE Futures Europe exchange.

Oil rose in the last hour of floor trading, gaining with U.S. equities on the report that negotiators may keep the euro zone’s existing 440 billion-euro ($590 billion) bailout fund when a new 500 billion-euro facility comes into force in mid-2012. The Dow Jones Industrial Average rose 0.4 percent.

S&P Ratings

Oil fell earlier after S&P said the European Financial Stability Facility may lose its top credit rating if any of the bailout fund’s six guarantors face a downgrade from AAA. A summit on the EU debt is scheduled for Dec. 9 in Brussels.

“A disappointing resolution to the big end-of-the-week meeting in Brussels would probably give the market a leg down,” said Michael Wittner, the head of oil-market research at Societe Generale SA in New York.

Futures rebounded when Oettinger said he believed there was consensus in Europe for a ban on importing Iranian oil. He was at the World Petroleum Congress in Doha, Qatar. He didn’t specify when the EU might implement a ban.

The EU agreed to tighten sanctions on Iran at a Dec. 1 meeting in Brussels, blacklisting certain individuals and companies while falling short of authorizing an immediate ban. The U.S. approved additional curbs on Iran’s oil industry on Nov. 21.

‘Might Be Waiting’

“The statements from Oettinger are a signal that there will be a consensus to ban the import of Iranian oil imports,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The Europeans might be waiting until the end of winter when demand eases.”

An Energy Department report tomorrow will probably show that U.S. crude oil stockpiles decreased by 1.25 million barrels last week, according to the median of 12 analysts surveyed by Bloomberg News. Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1.15 million barrels, and gasoline supplies gained 875,000 barrels, the survey showed.

Saudi Arabia pumped more than 10 million barrels of oil a day last month, and is prepared to supply a similar amount this month if needed, said Ali al-Naimi, the country’s oil minister. The desert kingdom is the biggest and most influential member of the Organization of Petroleum Exporting Countries, which meets on Dec. 14 in Vienna to set output targets for early 2012.

Oil volume in electronic trading on the Nymex was 400,710 contracts as of 4:35 p.m. in New York. Volume totaled 452,704 contracts yesterday, 31 percent below the three-month average. Open interest was 1.33 million contracts.

--With assistance from Anthony DiPaola in Doha, Qatar, Gabi Thesing in London, and Alex Morales and Ayesha Daya in Durban, South Africa. Editors: Richard Stubbe, Dan Stets

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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