BLBG:Oil Trades Near 8-Month High on Demand, Iran Tension Amid Shrinking Supply
Oil traded near the highest price in almost eight months as investors speculated that tension over Iran, shrinking U.S. crude stockpiles and signs of economic recovery will tighten supplies.
Futures were little changed after advancing 4.2 percent yesterday as the head of Iran’s army warned the U.S. against sending an aircraft carrier back to the Persian Gulf. Oil was also boosted by a report showing U.S. manufacturing expanded at the fastest pace in six months, adding to improved factory activity in Asia and Europe. Energy Department data (DOEASCRD) tomorrow may show crude inventories dropped 500,000 barrels last week, according to a Bloomberg News survey of analysts.
“The oil market is well balanced, and it’s really the threat of potential supply disruptions, together with the positive manufacturing activity globally, that are supporting this current upside bias,” Victor Shum, a senior principal at Purvin & Gertz Inc. in Singapore, said in a Bloomberg Television interview. He predicts that oil in New York will trade above $100 a barrel in the coming months.
Crude for February delivery was at $102.65 a barrel, down 31 cents, in electronic trading on the New York Mercantile Exchange at 1:50 p.m. Singapore time. The contract yesterday gained $4.13 to $102.96, the highest close since May 10. Prices climbed 8.2 percent in 2011, the third annual increase.
Brent oil for February settlement was at $111.83 a barrel, down 30 cents, after climbing 4.4 percent yesterday on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $9.19, compared with a record $27.88 on Oct. 14.
‘Under Pressure’
Brent crude will probably “come under pressure” in the first few weeks of 2012 as Libya restores production and Europe’s debt crisis threatens to curb demand, Commerzbank AG said in a report yesterday. It will trade at $110 at the end of the year as the global economy recovers and unrest in oil- producing countries endangers supplies, while West Texas Intermediate may end 2012 at about $107, the bank said.
Crude production by the Organization of Petroleum Exporting Countries rose to the highest level in three years in December, led by a recovery in Libyan output, a Bloomberg News survey showed. Output increased 162,000 barrels, or 0.5 percent, to an average 30.667 million barrels a day from a revised 30.505 million, the most since November 2008, according to the survey of oil companies, producers and analysts.
“OPEC production has been strong, there has been no shortage in supply,” Shum said.
Iranian Warning
Oil prices have risen on speculation that Iran may try to disrupt the supply of oil through the Strait of Hormuz as the U.S. and its allies increase pressure to halt what they say may be a covert nuclear weapons program. Sanctions signed into law by President Barack Obama on Dec. 31 aim to deter dealings with the Iranian central bank. Almost 17 million barrels a day of crude moved through the strait last year, according to the U.S. Energy Department.
Ataollah Salehi, the head of Iran’s army, said yesterday the U.S. shouldn’t send an aircraft carrier back to the Persian Gulf and that “we warn only once,” according to the state-run Fars news agency. The USS John C. Stennis passed through the Strait of Hormuz on Dec. 27 on a routine voyage and was operating in the northern Arabian Sea, said the U.S. 5th Fleet.
Signs of economic improvement around the world are also helping to lift crude prices. The Institute for Supply Management’s U.S. factory index rose to 53.9 in December from 52.7 a month earlier, the Tempe, Arizona-based group said.
Global Rebound
Purchasing-manager indexes for the U.K., Switzerland, China, India and Australia rose in December, while German unemployment fell more than economists forecast as exports of cars and machinery boomed, reports this week showed.
U.S. gasoline inventories (DOEASMGS) probably rose 1 million barrels last week, according to the median of eight analyst estimates in a Bloomberg survey before the Energy Department report. Supplies of distillate fuel, a category that includes diesel and heating oil, probably climbed 500,000 barrels the survey showed.
The American Petroleum Institute will release its inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Oil in New York has technical resistance at $103.39 a barrel, according to data compiled by Bloomberg. On the weekly chart, that’s the 61.8 percent Fibonacci retracement of the drop to $32.40 in December 2008 from a record high of $147.27 in July that year. Sell orders tend be clustered close to chart resistance. A six-week rally stalled in November last year near the same level.
Hedge funds and other money managers boosted bullish bets on Brent crude by 12,725 contracts in the week ended Dec. 27, ICE Futures Europe said yesterday in its weekly Commitment of Traders report.
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
