Oil Rises as Lebanon Rockets Hit Israel, Widening Gaza Conflict Crude oil rose, rebounding from its biggest decline in seven years, after rockets fired from Lebanon hit Israel, raising concern the widening Gaza conflict will threaten Middle East oil supplies. Further rockets fired from Lebanon landed in northern Israel after a salvo launched last night, Agence France-Presse reported. Venezuela cut oil sales and Angola asked operators like Total to trim production in accordance with last month’s OPEC decision, following similar notices from other members including Kuwait and the United Arab Emirates. Yesterday, crude plunged the most since 2001 as U.S. stockpiles increased more than expected. “Investors fear that if the conflict escalates Arab countries could unite against Israel,” said Andrey Kryuchenkov, an analyst with VTB Group in London. “And you have a huge producer, Iran, in the same region, so events like this really intensify the geopolitical risk premium that exists generally in the Middle East.” Crude oil for February delivery climbed as much as 85 cents, or 2 percent, to $43.48 a barrel in electronic trading on the New York Mercantile Exchange. It was at $43.20 at 11:38 a.m. London time. Yesterday, futures dropped $5.95 to $42.63 a barrel, the lowest settlement since Dec. 30. That was the biggest percentage decline since Sept. 24, 2001. Futures on the exchange are down 56 percent from a year ago. Rocket Attacks The attacks come a day after Hassan Nasrallah, leader of the Islamic Hezbollah militia, warned of “all possibilities” against Israel in reaction to the Gaza conflict. Prices jumped to a then-record $78.40 a barrel in July 2006 after Israel attacked Iranian-backed Hezbollah forces in Lebanon. In Nigeria, Royal Dutch Shell Plc resumed contracted deliveries of its Bonny, Bonga and Forcados crude grades after production was reduced by pipeline attacks and OPEC cuts, a spokesman said today. Brent crude oil for February settlement was at $46.82 a barrel, up 96 cents, on London’s ICE Futures Europe exchange at 11:37 a.m. London time. “Everyone knows that the first oil crisis started with a war in Israel, so it’s very important,” said Jochen Hitzfeld, an analyst at UniCredit Markets & Investment Banking in Munich. “U.S. demand is very weak. There’s no capacity left for inventories.” U.S. Inventories Grow Crude oil yesterday fell by the largest percentage in seven years after the larger-than-expected gains in oil and product stockpiles. U.S. inventories of crude oil rose 6.68 million barrels to 325.4 million barrels last week, the highest since May, the Energy Department said yesterday in a weekly report. Supplies were forecast to increase 800,000 barrels, according to the median of forecasts by 14 analysts in a Bloomberg News survey. Crude inventories at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 14 percent to 32.2 million barrels last week, the highest since at least April 2004, when the department began keeping track of supplies there. U.S. fuel consumption during the four weeks ended Jan. 2 averaged 20.1 million barrels a day, down 2.9 percent from a year earlier, the Energy Department report showed. Venezuelan crude sales to the U.S. were lowered by 166,000 barrels a day, the country’s Energy and Oil Ministry said in a statement. Sales to China were reduced by 18,000 barrels a day and to Europe by 5,000 barrels a day, the ministry said. The Organization of Petroleum Exporting Countries agreed on a record 14 percent supply cut on Dec. 17 in response to collapsing demand. To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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