BLBG: Oil Surges on Speculation of Iran Disruption
Oil surged above $100 a barrel on speculation supplies will be disrupted after a report that Iran will hold drills to close the Strait of Hormuz and that the Federal Reserve may announce additional stimulus measures.
Crude advanced as much as 3.6 percent after the state-run Fars news agency reported the military maneuvers will be “soon,” citing Parvis Sorouri, a member of the parliament’s national security and foreign policy committee. The strait is a bottleneck for oil exports from the Persian Gulf. The Fed is scheduled to release a statement on monetary policy later today.
“I saw the Iran story yesterday but those headlines seem to have got traction this morning,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “There are also rumors for further action by the Fed, but where they come from I don’t know. In this electronic world things can jump quickly and trigger stops.”
Crude for January delivery gained $2.04, or 2.1 percent, to $99.81 a barrel at 11:36 a.m. on the New York Mercantile Exchange. Earlier, futures touched $101.25 a barrel. Prices have risen 9.2 percent this year.
Brent oil for January settlement increased $1.91, or 1.8 percent, to $109.17 a barrel on the London-based ICE Futures Europe exchange.
“There are no headlines to explain this move,” said Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania. “One has to look at the usual suspects. It was probably a fat-fingered mistake or a margin call.”
Iran Statement
Crude pared gains after an Iranian Foreign Ministry spokesman said the Strait of Hormuz isn’t closed. The comments on the strait were made by people who don’t have an official title, said Ramin Mehmanparast, the spokesman.
Sorouri, in comments that first appeared yesterday on the website of the state-run Iranian Students News Agency, said, “If the world wants to make the region insecure, we will make the world insecure.”
The European Union added 180 Iranian officials and companies to a blacklist on Dec. 1 to try to pressure Iran to curtail its nuclear program. Iran says it isn’t seeking technology to build nuclear weapons.
“We’re seeing a return of geopolitics to the market,” said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. “The military exercise in the Strait of Hormuz signals an escalation in tension and has serious implications for the flow of oil.”
About 15.5 million barrels of oil a day, or a sixth of global consumption, flows through the Strait of Hormuz between Iran and Oman, according to the U.S. Department of Energy.
Iranian Production
Iran pumped 4.25 million barrels a day of oil in 2010, 5.2 percent of the world’s total production, according to BP Plc’s Statistical Review of World Energy. It’s OPEC’s second-largest producer, after Saudi Arabia.
“This is the kind of story that sends a shock wave through the market,” said Richard Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.
Oil also rose on speculation that the Fed will announce a third round of bond purchases in a tactic that has been dubbed quantitative easing. The Fed bought a total of $2.3 trillion in bonds in two rounds of quantitative easing from December 2008 until June 2011.
Fed Chairman Ben S. Bernanke and his policy-making colleagues plan to meet today to discuss the outlook for an economy that has strengthened since their November meeting, lowering the jobless rate to 8.6 percent from 9.1 percent.
Oil prices were higher earlier after German investor confidence unexpectedly increased and Spain sold more debt than planned at an auction, signals that Europe’s debt crisis may be easing.
German investor confidence improved for the first time in 10 months, according to the ZEW Center for European Economic Research. Spain’s sale of 12-and 18-month bills topped the Treasury’s maximum target.
To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net; Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
