Oil jumps 4 percent on Iran anxiety

NEW YORK Tue Jan 3, 2012 6:51pm EST

Excess oil is burnt off at the Mobil oil refinery at Altona in Melbourne June 27, 2008. REUTERS/Mick Tsikas

Excess oil is burnt off at the Mobil oil refinery at Altona in Melbourne June 27, 2008.

Credit: Reuters/Mick Tsikas

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NEW YORK (Reuters) - Oil prices surged on Tuesday, with U.S. crude hitting the highest settlement since May, fueled by strong economic data from the United States and China and mounting concern about supply disruption from Iran.

Brent crude jumped $5 in late activity as markets latched on to data showing U.S. construction spending near a 1-1/2 year peak in November and China manufacturing data that eased concerns of a slowdown in the world's No. 2 oil consumer.

Tuesday's gains on the first day of trading in the new year added to Brent's 13 percent rise in 2011, with support in recent weeks coming from Iranian threat's to choke of crude oil shipments through the strategic Strait of Hormuz in Tehran's ongoing standoff with the West.

"The supportive economic data and the geopolitical concerns are furthering the crude oil rally," said John Kilduff, partner at hedge fund Again Capital LLC in New York.

"The temperature is going up every day now on the Iran situation -- new sanctions, new missile launches, and saber rattling are all contributing," Kilduff added. .N

Brent February crude rose $4.75 to settle at $112.13 barrel, the highest close since the November 15 settlement at $112.39. It reached as high as $112.44 a barrel in post-settlement activity.

U.S. February crude rose $4.13 to settle at $102.96 a barrel, the highest close since May 10, after reaching a high of $103.37 earlier -- the highest intraday level since November 17.

Crude futures trading volumes rebounded after two weeks of thin holiday trading. Brent volume climbed 29 percent above its 30-day average, with U.S. volume 32 percent above its 30-day average.

U.S. heating oil jumped more than 4 percent and U.S. gasoline futures gained after European refiner Petroplus PPHN.S announced it may have shut down 3 refineries, with combined throughput capacity of nearly 340,000 barrels per day (bpd), after the company was hit by a credit freeze.

Workers at the Petroplus Petit Couronne refinery in France will meet union representatives from nearby refineries on Wednesday to decide whether to call for strike action after temporary shutdowns announced for the three plants.

THREATS TO OIL SUPPLY

Tensions between the West and Tehran, which stem from Iran's nuclear program, rose further as new U.S. and European Union financial sanctions began to take a toll on the OPEC member's economy.

Iran last week threatened to cut of oil shipments through the Strait of Hormuz, through which 35 percent of seaborne oil shipments travels. Iran on Tuesday threatened to act if the U.S. Navy carried through with plans to send an aircraft carrier back into the Gulf.

Trouble in fellow OPEC member added to oil market supply concerns. Nigeria's president declared a state of emergency in parts of the north affected by an Islamist insurgency after a series of bombs set off on Christmas Day.

In addition, Nigeria's fuel subsidies were ended on Sunday and prompted unions to call for strikes and protests.

U.S. OIL INVENTORIES

Weekly reports on U.S. oil inventories will be delayed by Monday's holiday. U.S. crude stocks were expected to have fallen, with distillate and gasoline stockpiles up last week, according to a preliminary survey of analysts on Tuesday.

The industry group American Petroleum Institute's inventory data is due at 4:30 p.m. EST (2130 GMT) on Wednesday, with the U.S. Energy Information Administration data following on Thursday morning.

(Additional reporting by Christopher Johnson in London and Florence Tan in Singapore; Editing by Alden Bentley; Marguerita Choy, Matthew Robinson and David Gregorio)

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Comments (25)
DetroitNative wrote:
Energy traders betting on disaster in an effort to line their pockets, meanwhile, we’re paying more at the pump struggling to pay our heating bills. Hang every one of them crooks from the nearest tree and lets end this thievery once and for all.

Jan 03, 2012 10:40am EST  --  Report as abuse
Ambani wrote:
Sahit Muja: Oil prices from $3 to $100 in 50 year as conflict US vs Iran is unavoidable

Iran threat to close the Strait of Hormuz to oil tankers and Iran has war game missile tests near the entrance to the Gulf.
Iran said that its scientists had produced first nuclear fuel rod, and its navy had test-fired a new medium-range surface-to-air missile, announcements that were likely to heighten concerns about the country’s disputed uranium-enrichment program.

Iran is itching for a war. A war with Iran would most likely substantially increase oil prices.

U.S., NATO military strike on Iran is increasingly likely, maybe even unavoidable.
Iran is extremely important to China and Russia, if Western countries decide to take military action against Iran, there is nothing that China and Russia can do; they won’t start a conflict with Western countries over Iran, because publicly becoming enemies with Western countries doesn’t fit China’s national interests, or Russia’s.

Therefore the two countries’ support for Iran will be limited to political and diplomatic contests . Iran has simply an Islamic, narcistic leadership, so from the reclusive Ayottolah’s they are suicidal to a point that they will sacrifice their country all the way as long as they wipe their enemies (Israel and the Jews, America and other arab countries) off the map.

Iran’s have said many times and on many occasions they will eradicate Israel and the Jews and all their enemies including America, and this is their sole aim .
Iran may use other organisations to do their work Hezbollah, Islamic Jihad, Army of God, Hamas etc.

Iran has slaughtered thousands, imprisoned tens of thousands, of their own people and continues to be a tolitarian and religous total dictatorship by the Ayotollah’s,.
America and the West have never met up with a group like those in Teheran and need unconventional thinking to fight the mad extemism of the Ayottolah’s.

My take is that Iran’s leaders who miscalculate their advantage and go to far in a hurry because they underestimate Western or even Israeli capacity for retaliation in case of an overreach.
I believe this is where we’re headed this year.

I hope to be wrong.

Whenever there’s a conflict in the Mideast, oil prices rise and world economies suffer. Conflicts help the producer nations and hurt consumer nations.
Oil price has risen from about $3 per barrel to over $100 per barrel in 50 years.

Canada is self sufficient in oil and a large producer. US can also produce more of the oil it needs, coal, natural gas and should relax some of its drilling restraints due to the dire current economy.
The Canada to Texas pipeline won’t hurt the environment more than a typical highway, and should be built. Instead, if Canada has to build pipelines to the Oceans to put oil onto tankers that would hurt the environment in the same way.
Sahit Muja
President and CEO
Albanian Minerals
New York

Jan 03, 2012 10:57am EST  --  Report as abuse
Jamtiki wrote:
Sure the price of oil went up! I’m only surprised it took this long. Looks like the oil companies and speculators needed a few extra billion dollars. It will go back down when all this blows over, who looses? The consumer.

Jan 03, 2012 11:01am EST  --  Report as abuse
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