BLBG:Oil Trades Near Six-Week High on Iran Threat to Strait of Hormuz Shipping
Oil traded near the highest price in six weeks after Iran threatened to block crude supplies through the Strait of Hormuz at a time when U.S. stockpiles are falling.
Futures were little changed after rising yesterday for a sixth day, the longest run of advances since November 2010. Iran’s official Islamic Republic News Agency cited Vice President Mohammad Reza Rahimi as saying the country would bar shipments through the strait if sanctions are imposed on its oil exports. U.S. oil inventories probably fell a third week, according to a Bloomberg News survey before tomorrow’s report.
“There’s been a significant decline in inventories,” said Gavin Wendt, a resource analyst at Mine Life Pty in Sydney. “If that trend continues, combined with the Iranian situation, it could be significant in driving oil prices even higher.”
Oil for February delivery was at $101.49 a barrel, up 15 cents, in electronic trading on the New York Mercantile Exchange at 3:40 p.m. Singapore time. It rose $1.66, or 1.7 percent, to $101.34 a barrel yesterday, the highest settlement since Nov. 16. Futures have climbed 11 percent this year after increasing 15 percent in 2010.
Brent oil for February settlement was down 10 cents at $109.17 a barrel on the London-based ICE Futures Europe exchange. The European contract’s premium to crude in New York was $7.68 a barrel, compared with $7.93 at yesterday’s close, the smallest differential based on settlement prices since Jan. 20.
Iran Maneuvers
About 15.5 million barrels of oil a day, or a sixth of global consumption, passes through the Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department. Iran’s navy started a 10-day exercise east of the passage that involved the use of submarines, ground- to-sea missile systems and torpedoes, Press TV said Dec. 24.
The U.S. and European governments are seeking help from Arab and Asian allies to reduce Iran’s oil revenue to pressure the Islamic republic to abandon a suspected nuclear weapons program. The strategy includes a push by France and the U.K. for an embargo on imports of Iranian oil by the 27 European Union countries as soon as next month. Iran claims its nuclear program is strictly for energy.
Iran is attempting to “distract attention” from its nuclear program by threatening to block oil shipments through the strait, Mark Toner, a State Department spokesman, said at a briefing yesterday in Washington.
U.S. Stockpiles
More than 75 percent of crude shipments that pass through the strait are destined for markets in Asia, particularly China, Japan, India and South Korea, according to the U.S. Energy Department.
U.S. crude stockpiles shrank by 2.5 million barrels, or 0.8 percent, to 321.1 million last week, according to the median estimate of seven analysts polled before an Energy Department report tomorrow. That would be the lowest level since the period ended Dec. 26, 2008. Six respondents forecast a decline and one an increase.
Oil inventories fell in December in the past five years as refiners reduced stockpiles at the year end to minimize their taxes. Texas and Louisiana assess taxes based on the fair-market value of inventories on Jan. 1.
The Energy Department is scheduled to release its weekly report at 11 a.m. on Dec. 29 in Washington, a day later than usual because of the Christmas holidays.
To contact the reporter on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
