Bloomberg News

Oil Rises to One-Month High as Greek Approval of Austerity Plan

February 14, 2012

Feb. 13 (Bloomberg) -- Oil rose to a one-month high after the Greek parliament approved an austerity plan, easing Europe’s debt crisis, and sanctions tightened on Iran. Technical issues halted electronic trading late in the session.

Futures climbed 2.3 percent and global equities advanced after passage of the package needed for 130 billion euros ($172 billion) in aid. Companies controlling more than 100 supertankers said they would stop loading cargoes from Iran, the second-biggest crude producer in the Organization of Petroleum Exporting Countries.

“We popped overnight on the Greek austerity measures and have maintained the gains,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “Crude is aping the equity market. If equities continue to move higher, crude will follow.”

Crude oil for March delivery rose $2.24 to $100.91 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 10. Prices are up 18 percent from a year ago.

CME Group Inc.’s Globex crude and products markets were halted by technical issues, the company said on its website. Trading resumed at 3:15 p.m. New York time.

Brent oil for March settlement rose 62 cents, or 0.5 percent, to end the session at $117.93 a barrel on the London- based ICE Futures Europe exchange.

European Union finance ministers are scheduled to meet on Feb. 15 in Brussels to decide whether to approve the aid package. Resolution of the negotiations would help contain the threat that speculators will target debt-saddled countries, including Italy and Portugal.

‘Won’t Fix Greece’

“This won’t fix Greece but it does buy time,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “This time should be used to come up with an exit strategy for countries to leave the euro zone in a controlled fashion.”

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.

“The approval of the Greek austerity measures gave the euro a boost and sent equities higher,” said Chris Dillman, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The news that shippers will stop loading Iranian cargoes is also driving the market higher.”

Stopping Shipments

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 EU’s Jan. 23 agreement to embargo Iran’s oil starting in 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.

“Iran is what’s really pushing crude up,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “If Iranian exports are choked off because of the insurance issue, we will see higher prices.”

Iranian 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.

Blaming Iran

Israeli Prime Minister Benjamin Netanyahu blamed Iran for two attacks on Israeli embassy personnel in India and Georgia. The Persian Gulf nation has blamed Israel for a series of deadly attacks on scientists involved in its nuclear program. Iran’s Supreme Leader Ayatollah Ali Khamenei pledged Feb. 3 to help “any nation or group that confronts the Zionist regime.”

Hedge funds and other large speculators increased bullish bets 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.

Oil volume in electronic trading on the Nymex was 484,686 contracts as of 3:26 p.m. in New York. Volume totaled 653,655 on Feb. 10. Open interest was 1.49 million contracts, the highest level since Sept. 9.

--With assistance from Grant Smith in London. 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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