BLBG:Oil Rises on German Output, Greek Debt Outlook
Oil climbed after German industrial production increased more than forecast and Greece moved closer to completing its debt swap, bolstering optimism that Europe’s economy and fuel demand will rebound.
Prices gained 0.4 percent as Germany’s Economy Ministry said output rose 1.6 percent in January, greater than the 1.1 percent estimate in a Bloomberg survey. Investors with at least 60 percent of eligible Greek bonds have agreed to take part in the debt restructuring. Oil shipments from Iran have dropped by up to 400,000 barrels a day, Barclays Capital said.
“We’re up because of greater optimism about the economic climate in Europe,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “You’re seeing this reflected in most markets. The dollar is down against the euro and equities are strong.”
Crude oil for April delivery rose 42 cents to settle at $106.58 a barrel on the New York Mercantile Exchange. Futures are up 7.8 percent this year.
Brent oil for April settlement advanced $1.32, or 1.1 percent, to end the session at $125.44 a barrel on the London- based ICE Futures Europe exchange.
The European benchmark contract’s premium to New York- traded West Texas Intermediate widened to $18.86 at the close, the most since Feb. 6. The spread increased after the U.S. Energy Department said yesterday that crude stockpiles at Cushing, Oklahoma (DOESCROK), the delivery point for New York-traded futures, surged to the highest level since July.
“The spread is blowing out, which tells you a lot about WTI,” Armstrong said. “It looks like the fundamentals are being priced into the contract.”
German Growth
The gain in Germany’s industrial production followed a 2.6 percent decline in December, the steepest drop in almost three years, data from the Economy Ministry in Berlin showed.
U.S. stocks rose and the euro strengthened against the dollar on speculation Greece was on the verge of reaching its participation target by the deadline of 10 p.m. in Athens today. The results will be announced tomorrow, Finance Minister Evangelos Venizelos told Parliament.
The Standard & Poor’s 500 (SPX) Index gained as much as 1.2 percent at 3:23 p.m. in New York, and the euro rose as much as 1.1 percent against the dollar. A stronger euro and weaker dollar boost oil’s appeal as an investment alternative.
“Oil turned up with the S&P,” said Phillip Streible, a Chicago-based commodities broker at RJO Futures. “It seems like Greece is starting to make some kind of progress, and with that there is some optimism in the market. Improved economic data globally is helping support oil prices. Iran is definitely a concern and it creates a floor in the market.”
Fuel Consumption
The European Union’s 27 members accounted for 16 percent of global oil demand in 2010, according to BP Plc (BP/)’s Statistical Review of World Energy, released on June 8. The U.S. was the world’s biggest oil-consuming country in 2010, responsible for 21 percent of global oil use, BP figures show.
U.S. household confidence improved last week to a four-year high as more Americans said the economy was improving. The Bloomberg Consumer Comfort Index (COMFCOMF) was minus 36.7 in the period ended March 4, the highest level since April 2008, up from minus 38.8 in the prior period. The gauge on the state of the economy reached a one-year high, while the buying-climate measure climbed to a level last exceeded in December 2009.
Shipments from Iran have dropped because sanctions are preventing the Islamic republic from selling oil, Amrita Sen, an analyst at Barclays Capital in London, said yesterday by e-mail. Half of the tankers booked to load at the country’s largest terminal last month didn’t complete their voyages, according to brokers, company officials and ship-tracking data.
Iranian Output
Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, pumped 3.45 million barrels a day last month, the lowest level since September 2002, according to data compiled by Bloomberg. The U.S. and European countries have imposed additional sanctions on Iran in the past few months to pressure the country into halting its nuclear program.
U.S. lawmakers are targeting global insurers as they seek to expand sanctions aimed at crippling Iran’s economy and forcing its leaders to make concessions involving the country’s disputed nuclear program.
Proposed legislation by Representative Brad Sherman, a California Democrat, and Senator Mark Kirk, an Illinois Republican, would penalize underwriters that insure or reinsure any deals with Iran prohibited under U.S. law, including oil and gas investments or insurance for companies or banks that are subject to U.S. sanctions.
Electronic trading volume on the Nymex was 618,635 contracts as of 3:23 p.m. in New York. Volume totaled 810,896 contracts yesterday, 29 percent above the three-month average. Open interest was 1.59 million, the highest level since June 13.
To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
