Bloomberg News

Oil Advances on U.S. Economic Data, Tension in Middle East

December 29, 2011

Dec. 29 (Bloomberg) -- Oil rose on signs the U.S. economy is weathering Europe’s debt crisis and amid speculation that escalating tension in the Middle East may disrupt supplies.

Crude advanced for the seventh time in eight days after a measure of U.S. jobless claims fell to a three-year low and pending sales of existing homes jumped for a second month. Iran threatened this week to block crude shipments through the Strait of Hormuz if sanctions are imposed on its oil exports.

“We are getting support from the U.S. economic data,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. “More than anything else, a possible confrontation with Iran is pushing up oil.”

Crude oil for February delivery gained 29 cents, or 0.3 percent, to settle at $99.65 a barrel on the New York Mercantile Exchange. Prices have increased 9.1 percent this year.

Brent oil for February settlement rose 45 cents, or 0.4 percent, to $108.01 a barrel on the London-based ICE Futures Europe exchange.

The four-week moving average for jobless claims dropped to 375,000 last week, the lowest level since June 2008, Labor Department data showed in Washington. The index of signed contracts to buy previously owned houses rose 7.3 percent in November, the National Association of Realtors said today.

Iran Threat

Iran is showing “irrational behavior” with its threat to shut the Strait of Hormuz, Victoria Nuland, a U.S. State Department spokeswoman, said today in Washington. Iranian Vice President Mohammad Reza Rahimi issued the warning in a Dec. 27 report published by the state-run Islamic Republic News Agency.

A U.S. aircraft carrier was spotted in the area where Iran is conducting naval exercises, IRNA reported today, citing navy Deputy Commander Mahmoud Mousavi. The maneuvers, announced Dec. 24, are scheduled to run through Jan. 4.

The U.S. Navy won’t tolerate a disruption to shipping in the strait, Rebecca Rebarich, a Navy spokeswoman, said yesterday in an e-mail.

“The Iranian connection in the Middle East is the powder keg,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.

About 15.5 million barrels of oil a day, or a sixth of global consumption, passes through the Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department.

Iran pumped 3.56 million barrels a day of crude in November, according to data compiled by Bloomberg, making it the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.

Euro Rebounds

Oil also increased as the euro rebounded from the lowest level in 15 months against the dollar.

The single European currency was little changed at $1.2943 from $1.2941 yesterday. Earlier, it touched $1.2858, the lowest price since September 2010, after Italy auctioned 7.02 billion euros ($9 billion) of bonds, short of a target. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.

“All traders are looking at the same thing,” Ilczyszyn said. “They are looking at the euro-dollar connection and what equities are doing.”

The Standard & Poor’s 500 Index gained 0.8 percent at 3:05 p.m. and the Dow Jones Industrial Average increased 0.9 percent.

Crude rebounded after falling as much as 1.1 percent in intraday trading on a government report that showed U.S. stockpiles unexpectedly increased as demand declined.

Inventory Report

Inventories rose 3.9 million barrels to 327.5 million in the week ended Dec. 23, the Energy Department reported. Supplies were forecast to drop 2.5 million barrels, based on the median of 10 analyst estimates in a Bloomberg News survey. The American Petroleum Institute said late yesterday that crude supplies climbed 9.57 million barrels last week.

Total products supplied decreased 825,000 barrels a day to 18.5 million, falling for the first time in four weeks, the Energy Department reported.

“The number was bearish and should bring the price down,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York.

The U.S. is the world’s biggest oil consumer, accounting for about 21 percent of global consumption, according to BP Plc’s annual Statistical Review of World Energy. The 27 member states of the European Union accounted for 16 percent.

Oil volume in electronic trading on the Nymex was 263,030 contracts as of 3:06 p.m. in New York. Volume totaled 293,202 yesterday, 53 percent below the three-month average. Open interest was 1.33 million contracts.

-- With assistance from Bob Willis in Washington, Alessandra Migliaccio in Rome and Shaji Mathew in Dubai. Editors: Margot Habiby, Bill Banker

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus