BLBG:Oil Heads for Third Yearly Gain on Iran Tension, U.S. Economy Speculation
Oil rose for a second day, heading for a third yearly increase, on speculation escalating tension in the Middle East may disrupt supplies as a recovery in the U.S. economy bolsters demand.
Futures advanced for the eighth day in nine, extending this year’s gain to 9.2 percent. A U.S. State Department spokeswoman yesterday called Iran’s threats to shut the Straits of Hormuz “irrational behavior.” About one-sixth of global supply travels through the seaway. The country faces sanctions on its crude exports and a possible boycott by European oil buyers over its nuclear program. Prices gained yesterday after U.S. jobless claims fell to a three-year low.
“With both the Brent price and West Texas sitting roughly on $100, these types of prices are related very much to the overall geopolitical risk premium,” said David Land, the head of analysis at CMC Markets Ltd. in Sydney, who expects oil to outperform other commodities next year. “Compared to the wider commodity space, oil is one area that I’d be more bullish on.”
Crude for February delivery gained as much as 51 cents, or 0.5 percent, to $100.16 a barrel on the New York Mercantile Exchange. It was at $100.01 at 10:40 a.m. Singapore time. Prices climbed 15 percent in 2010.
This year’s gain would be the smallest since 2006 when the contract increased 0.02 percent. Prices declined 54 percent in 2008 after the collapse of Lehman Brothers Holdings Inc. triggered a global financial crisis that sapped energy demand.
Brent oil for February settlement rose to $107.94 a barrel, down 7 cents on the London-based ICE Futures Europe Exchange. The contract is set to gain 14 percent this year, also the smallest increase since 2006.
‘Sanctions Pinch’
“We’ve seen quite a bit of irrational behavior from Iran recently,” said Victoria Nuland, a State Department spokeswoman when asked yesterday about Iran’s threats. “One can only guess the sanctions are beginning to pinch.” Iranian Vice President Mohammad Reza Rahimi issued a warning to shut the waterway in a Dec. 27 report published by the state-run Islamic Republic News Agency.
About 15.5 million barrels of oil a day passes through the Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department.
A U.S. aircraft carrier was spotted in the area where Iran is conducting naval exercises, state-run Islamic Republic News Agency reported yesterday, citing the navy’s Deputy Commander Mahmoud Mousavi. Iran’s navy started the exercises on Dec. 24 and plans to conclude the drills on Jan. 4, the news agency reported.
‘Geopolitical Premium’
The country pumped 3.56 million barrels a day of crude in November, according to data compiled by Bloomberg, making it the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.
“For a country that relies so heavily on oil exports like Iran does, it’s obviously not something that they would do lightly,” said CMC’s Land. “But certainly the threat of it is enough to add back the geopolitical premium we’re seeing.”
Prices may rise next week amid Iran’s threat to shut the the straits, a Bloomberg News survey showed. Thirteen of 32 analysts, or 41 percent, forecast oil will increase through Jan. 6. Ten respondents, or 31 percent, predicted prices will decrease and nine estimated there will be little change.
U.S. Economy
Oil gained yesterday on signs that the U.S. economy is weathering Europe’s debt crisis. The four-week moving average for jobless claims dropped to 375,000 last week, the lowest level since June 2008, Labor Department data showed in Washington. Crude rebounded after falling as much as 1.1 percent in intraday trading yesterday following a government report that showed U.S. stockpiles unexpectedly increased as demand declined.
“At this stage, WTI looks like it’s found a fairly comfortable range at $95 to $100,” Land said. “If the U.S. starts showing better-than-expected improvement, that would go a long way to make the outlook for the global economy more rosy than currently.”
Inventories (DOESCRUD) rose 3.9 million barrels to 327.5 million in the week ended Dec. 23, the Energy Department reported. Supplies were forecast to drop 2.5 million barrels, based on the median of 10 analyst estimates in a Bloomberg News survey. The American Petroleum Institute said Dec. 28 that crude supplies climbed 9.57 million barrels last week.
Total products supplied decreased 825,000 barrels a day to 18.5 million, falling for the first time in four weeks, the Energy Department reported.
To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
