Bloomberg News

Oil Rises From Three-Day Low on Iran Supply Threat, Greek Vote

February 13, 2012

Feb. 13 (Bloomberg) -- Oil recovered from a three-day low in New York as concern grew that a ban on Iranian crude may cut supplies while the Greek parliament’s approval of austerity measures boosted hope for a solution to Europe’s debt crisis.

Futures climbed as much as 1.3 percent as the euro headed toward a two-month high after 199 lawmakers supported the bill in a roll-call vote shown live on state-run Vouli TV, against 74 who opposed it. The measures were needed for a 130 billion-euro ($172 billion) aid package, Greece’s second since May 2010. Oil may extend gains after companies controlling more than 100 supertankers said they would stop loading cargoes from Iran, tightening sanctions on OPEC’s second-biggest producer.

“Iran is what’s really pushing crude up,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London who predicts prices may rise further. “If Iranian exports are choked off because of the insurance issue we will see higher prices. The stronger euro is contributing to today’s price increase, but I don’t think a bailout will lead to a miraculous recovery in Greece.”

Crude for March delivery rose as much as $1.32 to $99.99 a barrel in electronic trading on the New York Mercantile Exchange. It was at $99.78 at 12:57 p.m. London time. Futures fell 1.2 percent to $98.67 on Feb. 10, the lowest settlement since Feb. 7, and are up 18 percent from a year ago.

Brent oil for March settlement on the London-based ICE Futures Europe exchange was up $1.06 at $118.37 a barrel. The more-actively traded April contract was up 99 cents at $117.74. The European benchmark crude was at a premium of $18.59 to New York-traded West Texas Intermediate grade, compared with a record $27.88 on Oct. 14.

Iran Sanctions

Overseas Shipholding Group said Feb. 10 the pool of 45 supertankers from seven owners in which its carriers trade will no longer call at Iran. Nova Tankers A/S and Frontline Ltd., with a combined 93 vessels, said Feb. 9 and Feb. 11 they won’t ship crude from the Persian Gulf nation.

The European Union’s Jan. 23 agreement to embargo Iran’s oil from July because of its nuclear program extended the ban to ship insurance. With about 95 percent of the tanker fleet insured under rules governed by European law, fewer vessels will be able to load in Iran.

Nuclear Claims

“Latest reports on Iran suggest that financial sanctions are already hitting oil production, with falls in output and exports likely to accelerate,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. “The nation is looking to showcase its nuclear capabilities to the rest of the world in the coming days, which we think could provide additional support to oil prices in the region as tensions flare.”

Iran’s crude output dropped the most in six months by an average 30,000 barrels a day, or 0.8 percent, to 3.55 million barrels a day in January, according to a Bloomberg survey of analysts and producers. President Mahmoud Ahmadinejad said Feb. 11 he will unveil “major nuclear accomplishments” in coming days, state-run Press TV reported. Iran has threatened to block shipments through the Strait of Hormuz, a transit route for about 20 percent of the world’s globally traded oil.

Passage of the austerity bill in Greece puts the spotlight on a meeting of euro-region finance ministers on Feb. 15 in Brussels to decide whether to approve the aid package. Resolution of the negotiations, which started in July, would help contain the threat that speculators will target debt- saddled countries, including Italy and Portugal.

The 27 EU member states accounted for about 16 percent of global oil demand in 2010, according to BP Plc’s annual Statistical Review of World Energy.

Speculative Positions

Hedge funds and other large speculators increased bullish wagers on oil by 4,440 contracts, or 2.2 percent, to 205,709 in the week ended Feb. 7, the U.S. Commodity Futures Trading Commission said in a weekly report Feb. 10.

Money managers raised bullish bets on Brent crude by 3,972 contracts in the week ended Feb. 7, according to data from ICE Futures Europe. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 90,395 lots, the exchange said today in its weekly Commitment of Traders report. That’s up from 86,423 the previous week.

Morgan Stanley predicts Brent crude may fall as low as $85 a barrel this year as supplies increase and global demand slows.

Crude inventories may increase in the first half of this year, putting pressure on prices to come lower if geopolitical tensions subside and no unplanned supply disruptions occur, Hussein Allidina, the bank’s head of commodity research in New York, said in a report today. Currently high prices and a weaker economic outlook will also slow demand, he said.

--Editors: John Buckley, Rob Verdonck

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

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


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