BLBG:Oil Trades Near Nine-Month High as Iran Tension Counters Economic Concern
Oil traded near the highest level in nine months as concern that tension with Iran will disrupt supplies countered speculation the global economy may falter and curb fuel demand.
Futures were little changed after sliding as much as 0.5 percent. The International Atomic Energy Agency said talks over Iran’s nuclear program failed, while an Iranian general threatened military action. Prices fell earlier as crude’s relative strength index signaled prices may have risen too quickly and a report showed manufacturing in China may shrink a fourth month. U.S. oil stockpiles climbed 1.5 million barrels last week, according to a Bloomberg News survey.
“The price of crude has more to do with what’s happening in Iran and the Middle Eastern risk premium,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney, who sees resistance for New York crude at about $106 a barrel. “While the stalemate is there, the premium exists. Demand forecasts for the U.S. remain neutral to bearish.”
Oil for April delivery was at $106.17 a barrel, down 8 cents, in electronic trading on the New York Mercantile Exchange at 5:22 p.m. Sydney time. It earlier slid as much as 54 cents. Front-month prices advanced 2.5 percent yesterday to the highest close since May 4. U.S. floor trading was shut on Feb. 20 because of the Presidents’ Day holiday and trades were booked with yesterday’s transactions. Prices are 13 percent higher in the past year.
Brent oil for April settlement was down 11 cents at $121.55 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $15.38. It reached a record $27.88 on Oct. 14.
Iran Talks Fail
The IAEA said it failed to gain access to Iran’s suspected nuclear-related military base. The United Nation’s atomic watchdog said the Organization of Petroleum Exporting Countries’ second-biggest oil producer refused permission to visit the site at Parchin during two days of talks that ended yesterday.
The meetings were aimed at defusing tension over a possible military component to the Islamic republic’s atomic program. Israel and the U.S. have said all options are on the table in ensuring the Persian Gulf nation doesn’t acquire atomic weapons. Iran may launch a preemptive strike to protect its facilities, the state-run Fars news agency cited Mohammad Hejazi, deputy head of the general staff of the Iranian Armed Forces, as saying.
Concern that oil supplies will be disrupted has increased as tension between Iran and Western nations escalates, David Greely, head of energy research at Goldman Sachs Group Inc. in New York, said in a report today. The bank maintained a recommendation that investors buy Brent contracts for July 2012 to take advantage of rising prices.
Slowing Growth
Oil’s rally in New York may stall after the 14-day relative strength index climbed above 70, according to data compiled by Bloomberg. A reading higher than that level signals futures may have risen too quickly and further gains probably aren’t sustainable. Investors tend to sell contracts when prices are considered overbought.
Prices fell earlier on signs global growth may slow. An index of manufacturing in China, the second-biggest oil user, from HSBC Holdings Plc and Markit Economics came in at 49.7 for February, signaling factory activity will shrink a fourth month as Europe’s sovereign-debt crisis damps exports and the housing market cools. A reading below 50 points to a contraction.
U.S. Stockpiles
Agreement on a second bailout for Greece may not be enough to end Europe’s debt crisis and countries in the euro-area periphery must reduce debt and improve competitiveness, Bank of England Deputy Governor Charlie Bean said in a speech yesterday in Glasgow, Scotland.
Crude inventories in the U.S., the world’s biggest user of the commodity, probably climbed to the highest level in almost five months as rising North American output and the planned reversal of the Seaway pipeline bolstered stockpiles, the Bloomberg News survey showed before tomorrow’s Energy Department report.
Gasoline supplies declined 250,000 barrels last week, according to the median of eight analyst estimates in the survey. Distillate inventories, a category that includes diesel and heating oil, probably fell 1.38 million barrels.
The Energy Department is scheduled to release its weekly report at 11 a.m. tomorrow in Washington, a day later than usual because the government and financial markets were closed for the Presidents’ Day holiday. The industry-funded American Petroleum Institute will publish its own data today.
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
