Bloomberg News

Oil Fluctuates Amid U.S. Sanctions on Iran, Euro’s Slip

July 12, 2012

Oil rose after the U.S. announced more sanctions on Iran, the second-biggest crude-producing member of the Organization of Petroleum Exporting Countries.

Futures climbed 0.3 percent as the U.S. said it will target Iran’s weapons proliferation networks and “front companies” used to evade international sanctions. Crude dropped earlier as the euro fell to a two-year low against the dollar and the International Energy Agency forecast “muted” growth in oil demand in 2013.

“Concern that the new sanctions will disrupt supply are lending the market support,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The big picture for the global economy remains pretty bleak.”

Crude oil for August delivery increased 27 cents to settle at $86.08 a barrel on the New York Mercantile Exchange. Prices have decreased 13 percent this year.

Brent oil for August settlement climbed 84 cents, or 0.8 percent, to end the session at $101.07 a barrel on the London- based ICE Futures Europe exchange. It was the highest settle since May 31. The European benchmark contract traded at $14.99 premium to New York-traded West Texas Intermediate crude, the most since June 11.

Daily exports of the 12 main grades of North Sea crude for loading in August will slump to the lowest level in 26 months, according to data obtained by Bloomberg. Shipments of Forties, one of the four grades that make up the benchmark Dated Brent, will drop by 21 percent to 290,323 barrels a day next month, the least in more than five years, because of planned maintenance.

“The Brent market is focused on the nearby maintenance that will hurt production,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.

Intended Impact

The increase in sanctions is intended to disrupt Iran’s “nuclear and ballistic-missile programs as well as its deceptive efforts to use front companies to sell and move its oil,” the Treasury Department said in a statement today.

The Treasury identified as sanction targets four entities it said were being used to facilitate Iran’s oil trade: Petro Suisse Intertrade Company SA (Petro Suisse), incorporated in Switzerland; Hong Kong Intertrade Co., based in Hong Kong; Noor Energy (Malaysia) Ltd., incorporated in Malaysia; and Petro Energy Intertrade Co., operating out of Dubai.

Iranian Production

Crude-oil output in Iran declined 65,000 barrels to 3.16 million barrels a day last month, the lowest level since June 1992, according to a Bloomberg survey of oil companies, producers and analysts.

Oil in New York tumbled as much as 1.9 percent earlier as the euro dropped as much as 0.6 percent to $1.2167, the lowest level since June 30, 2010. A stronger dollar reduces the appeal of raw materials as an investment alternative.

U.S. consumer confidence stagnated last week. The Bloomberg Consumer Comfort Index held at minus 37.5 in the week ended July 8. Some 86 percent of those surveyed said the economy was in bad shape, 21 percentage points higher than the average since 1985.

“The economic picture remains negative with the European debt crisis and concerns about China,” said John Kilduff, a partner at Again Capital LLC, a New York-based energy hedge fund.

A Chinese government report tomorrow may show gross domestic product grew 7.7 percent in the second quarter from a year earlier, the least in more than three years, according to the median estimate of 38 economists surveyed by Bloomberg. China is the world’s second-biggest crude-consuming country after the U.S.

Crude Demand

Oil demand will increase by a “relatively muted” 1 million barrels a day, or 1.1 percent, to an average of 90.9 million in 2013, the Paris-based IEA said today in its first outlook for the coming year. Global oil use in emerging economies will surpass that of developed nations for the first time in 2013, the IEA forecasts.

Production of crude from outside OPEC will climb next year, led by additional output from Canada, the U.S. and Brazil, the IEA said. Non-OPEC producers will bolster supplies by 700,000 barrels a day to average 53.9 million a day, compared with growth of 400,000 a day this year. The 2012 outlook was trimmed by 200,000 barrels a day.

Electronic trading volume on the Nymex was 413,036 contracts as of 4:26 p.m. in New York. Volume totaled 540,884 contracts yesterday, 4.5 percent below the three-month average. Open interest was 1.42 million.

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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