Bloomberg News

Oil Climbs for a Second Day on U.S. Crude Supply, Iran Outlook

December 20, 2011

Dec. 20 (Bloomberg) -- Oil rose for a second day in New York on forecasts that U.S. crude stockpiles declined for a second week and speculation that further sanctions against Iran will curb supply from OPEC’s second-largest producer.

Futures advanced as much as 1.7 percent, extending yesterday’s 0.4 percent gain. U.S. crude inventories fell by 2 million barrels last week, according to a Bloomberg News survey before tomorrow’s Energy Department report. Gulf Cooperation Council leaders are in Saudi Arabia for a meeting that may address responses to Iran’s nuclear program.

“In the U.S., the economy is on the road to recovery, with falling unemployment and consistently improving growth against a background of low and falling oil stockpiles,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “In Europe growth is virtually non-existent.”

Crude for January delivery climbed as much as $1.62 to $95.50 a barrel in electronic trading on the New York Mercantile Exchange. The contract, which expires today, was at $95.49 at 1:20 p.m. London time. The more actively traded February future gained $1.55 to $95.60. Prices are 4.5 percent higher this year after rising 15 percent in 2010.

Brent oil for February settlement on the London-based ICE Futures Europe exchange rose as much as $2.11, or 2 percent, to $105.75 a barrel. The European benchmark contract was at a premium of $10.05 to New York-traded West Texas Intermediate grade for the same month. The front-month spread widened to a record $27.88 on Oct. 14.

European Economy

Crude also gained as the euro advanced against the dollar after Spain’s borrowing costs dropped at a sale of three- and six-month bills. The nation sold 5.64 billion euros of the debt, exceeding its maximum target of 4.5 billion euros.

Data today from Germany indicated Europe’s largest economy is weathering the region’s debt crisis. The nation will probably avoid a recession, two economic institutes that advise Chancellor Angela Merkel’s government said, and figures from the Ifo institute showed business confidence unexpectedly rose for a second month in December.

The Munich-based institute’s business climate index, based on a survey of 7,000 executives, rose to 107.2 from 106.6 in November. Economists expected a drop to 106, the median forecast of 36 economists in a Bloomberg News survey showed.

‘Surge’ on Sanctions

Oil may surge by $40 a barrel if sanctions halt supplies from Iran, Francisco Blanch, Bank of America Corp.’s head of commodities research in New York, said in a report. The Persian Gulf nation is the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.

Iran may face new sanctions that target its crude trade as the European Union and other importers seek to intensify pressure over its nuclear program. The country pumped about 5 percent of the world’s oil last year, based on BP Plc’s annual Statistical Review of World Energy. It borders the Strait of Hormuz, the sea channel through which about 15.5 million barrels a day, or a sixth of global shipments, are transported, according to the U.S. Energy Information Administration.

The nation is likely to stockpile more unsold crude at sea as foreign buyers avoid the country’s oil, according to consultant JBC Energy GmbH.

“Given the tightening noose, it is not unlikely that we may see more Iranian crude going into floating storage until the current issues have been resolved,” JBC’s Chairman Johannes Benigni said today in a report from Vienna.

U.S. crude inventories probably fell last week as refineries in states along the Gulf of Mexico limit stockpiles before year end to reduce tax bills, according to the Bloomberg News survey of analysts. All seven respondents forecast a drop in supplies. Gasoline stockpiles are expected to have increased by a median 1 million barrels.

The industry-funded American Petroleum Institute in Washington will release its supply data today.

Oil in New York has technical resistance along the 50-day moving average, at $94.84 a barrel today, data compiled by Bloomberg show. Futures settled below that indicator in the past three days. Sell orders tend to be clustered near chart- resistance levels.

--With assistance from Yee Kai Pin in Singapore and Ben Sharples in Melbourne. Editors: John Buckley, Raj Rajendran

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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