Brent Oil Rises to Nine-Month High on German Business Confidence
February 23, 2012, 9:25 AM ESTBy Grant Smith and Ben Sharples
Feb. 23 (Bloomberg) -- Brent crude rose to its highest price in more than nine months in London after German business confidence surpassed forecasts, reflecting optimism that steps to resolve Europe’s debt crisis will be successful.
Brent futures advanced as much as 1.3 percent to their strongest since May 3. The Munich-based Ifo institute’s business climate index climbed for a fourth month to its highest level since July. U.S. initial jobless claims held at a four-year low last week, adding to evidence the world’s biggest economy is recovering. Crude in New York rose as much as 0.5 percent to its highest since May 4.
“With European policymakers now on a clearer path to protect global markets from any potential spillover from a disorderly Greek default scenario, downside risks from a complete macroeconomic meltdown are receding fast,” said Amrita Sen, an analyst at Barclays Plc in London.
Brent oil for April settlement rose as much as $1.60 to $124.50 a barrel on the ICE Futures Europe exchange in London and was at $124.32 at 1:58 p.m. local time. The European benchmark contract’s premium to New York-traded West Texas Intermediate widened to $17.67 a barrel from $16.62 yesterday.
On the New York Mercantile Exchange, crude for April delivery was at $106.65, up 37 cents, after rising as much as 52 cents to $106.80. New York futures have risen 3.3 percent this week on speculation that tensions with Iran over its nuclear program will threaten supplies. Prices have gained 8.7 percent in the past year.
Economic Signals
The Ifo institute’s German business climate index, based on a survey of 7,000 executives, climbed to 109.6 from 108.3. Economists had predicted a reading of 108.8, according to the median of 38 estimates in a Bloomberg News survey.
Applications for jobless benefits in the U.S. were unchanged in the week ended Feb. 18 at 351,000, the fewest since March 2008, Labor Department figures showed today. The median projection in a Bloomberg News survey called for 355,000 claims.
“We saw a sharp decline in the U.S. jobless claim s last week, showing there is a strong improvement in the U.S. employment conditions,” Myrto Sokou, an analyst at Sucden Financial Ltd. in London, said by e-mail. “Today’s data were fairly in line with expectations, verifying the optimistic employment picture.”
Iran Tensions
Prices advanced yesterday after officials from the International Atomic Energy Agency were denied access to an Iranian military base. The U.S. and Israel haven’t ruled out air strikes against Iran’s nuclear facilities, escalating tensions in a region that’s home to 54 percent of global oil reserves.
Iran’s refusal to allow access to sites where Western intelligence agencies have reported suspected nuclear weapons work is “another demonstration of Iran’s refusal to abide by its international obligations,” White House spokesman Jay Carney said yesterday.
Turkey’s sole refining company said today it won’t be able to use Turkiye Halk Bankasi AS, the bank that handles Iranian crude purchases, to pay for oil imports from the Gulf state once U.S. sanctions come into force.
Tupras Turkiye Petrol Rafinerileri AS, which has a contract to buy 9 million metric tons of crude a year from Iran, can’t use the bank after the end of June without a waiver from the U.S., a Tupras official said today. Turkey government is asking for an exemption for the refiner’s Iranian business via Halk bank from the U.S. sanctions, the official said.
Market ‘Well-Supplied’
Iran produced 3.5 million barrels of oil a day last month, according to analysts’ estimates compiled by Bloomberg. Saudi Arabia, the biggest member in the Organization of Petroleum Exporting Countries, had output of 9.7 million barrels a day.
Oil markets are currently well supplied, Saudi Arabia’s deputy oil minister told reporters today in New Delhi.
“The market is very much well-supplied and there’s no need for concern,” Prince Abdulaziz bin Salman said. “We have demonstrated to our friends here how much excess capacity there is today and how much capacity will be there in the future.”
U.S. inventories rose by 3.55 million barrels, the American Petroleum Institute said. A government report today may show they gained by 1.35 million barrels, according to a Bloomberg News survey of analysts.
Gasoline Stockpiles Grow
Gasoline supplies rose 314,000 barrels last week, figures from the industry-funded API showed. They are projected to increase 250,000 barrels in the Energy Department report, according to the median of 10 analyst estimates in the survey. Distillate inventories, a category that includes diesel and heating oil, gained 630,000 barrels compared with a forecast for a 1.5 million barrel decline.
The survey also estimated that refineries operated at 83.5 percent of capacity in the seven days ended Feb. 17, down 0.5 percentage point from the prior week’s one-month high.
The Energy Department is scheduled to release its weekly report at 11 a.m. today in Washington, a day later than usual because the government and financial markets were closed for the Presidents’ Day holiday. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines and files the reports with the government for the report.
Oil’s advance in New York is stalling after the 14-day relative strength index climbed above 70 yesterday for the first time since Nov. 16, according to data compiled by Bloomberg. This indicates futures have risen too quickly and further gains aren’t sustainable. Investors tend to sell contracts when prices are considered overbought. Today’s reading is about 68.4.
Goldman Sachs Group Inc. recommended buying September crude futures on the Nymex on speculation supplies will tighten after the reversal of the Seaway pipeline in June, according to a weekly report e-mailed today. The bank also advised investors to stop buying July Brent contracts in London.
The 500-mile (800-kilometer) pipeline owned by Enterprise Products Partners LP and Enbridge Inc. will allow oil from the Midcontinent to reach the Gulf of Mexico for export.
--With assistance from Yee Kai Pin and Ann Koh in Singapore. Editors: John Buckley, Randall Hackley
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 at akwiatkowsk2@bloomberg.net
