Bloomberg News

Crude Advances Amid Manufacturing Expansion, Tension Over Iran

January 03, 2012

Jan. 3 (Bloomberg) -- Oil climbed in New York after manufacturing activity expanded in China and India and investors bet that further sanctions against Iran will curb supply.

Futures gained as much as 2.1 percent on the first trading day of 2012. India’s Purchasing Managers’ Index rose the most in six months in December, HSBC Holdings Plc and Markit Economics said yesterday, and a manufacturing index in China signaled expansion. Iran’s Deputy Navy Commander Rear Admiral Mahmoud Mousavi told Press TV that any effort to harm the country’s interests will lead to “reciprocal measures.”

“Iran is the wildcard,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin in Sydney. “There’s still concern that Iran, when pushed, will do something. The manufacturing data also provides a bit of confidence.”

Crude for February delivery advanced as much as $2.08 to $100.91 a barrel in electronic trading on the New York Mercantile Exchange and was at $100.82 at 4:09 p.m. Singapore time. The contract fell 0.8 percent to $98.83 on Dec. 30 for an annual increase of 8.2 percent, the third consecutive yearly gain.

Brent oil for February settlement rose $1.55, or 1.4 percent, to $108.93 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $8.11, compared with a record $27.88 on Oct. 14.

Brent’s premium to WTI has declined as Libya resumed production of light, sweet crude after last year’s uprising against Muammar Qadaffi. The nation exported a cargo of Es Sider crude from the port of the same name on Jan. 1, the National Oil Corp. said in a website notice. It is the first shipment of the grade from that location since the rebellion.

Iran Sanctions

Crude also rose as the U.S. and its allies increased pressure on Iran to halt what they say may be a covert nuclear weapons program. Sanctions signed into law by President Barack Obama on Dec. 31 aim to deter dealings with the Iranian central bank. The European Union, which is considering a ban on oil from Iran, will be ready by Jan. 30 to decide whether to extend sanctions, Michael Mann, a spokesman for the EU, said yesterday.

Iran, OPEC’s second-largest producer, doesn’t intend to disrupt shipping in the Strait of Hormuz, Mousavi said yesterday, according to Press TV. Almost 17 million barrels a day of crude moved through the channel last year, the U.S. Energy Department said in an update on “world oil transit chokepoints.” Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries and sends some oil shipments through the strait.

Manufacturing Growth

China’s purchasing managers’ index rose to 50.3 in December from 49 in November, the Beijing-based logistics federation said Jan. 1. A number above 50 indicates expansion. The country accounted for about 11 percent of the world’s oil consumption in 2010 and India for 4 percent, according to BP Plc’s Statistical Review of World Energy. The U.S. is the world’s biggest crude user at 21 percent.

Australian manufacturing expanded for the first time in six months in December, the Australian Industry Group and PricewaterhouseCoopers said in a survey released today.

Petroleos Mexicanos, Latin America’s largest crude producer, closed the oil export terminal Cayo Arcas, shutting down a third facility in the Gulf of Mexico due to adverse conditions, the nation’s Merchant Marine said in its daily weather bulletin.

Hedge funds expanded wagers on rising oil prices by 7.6 percent, or 13,585 contracts, to 192,446 in the seven days ended Dec. 27, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report last week.

--Editors: Paul Gordon, Mike Anderson

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net


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