Oil Heads for Biggest Weekly Gain in Two Months on U.S. Economy, Iran

By Ramsey Al-Rikabi - Dec 22, 2011 9:28 PM PT

Oil headed for its biggest weekly gain in almost two months in New York after U.S. economic reports indicated that growth in the world’s biggest crude consumer will accelerate.
Futures rose as much as 0.6 percent after advancing 0.9 percent yesterday as U.S. initial jobless claims dropped to the lowest level since April 2008. Leading indicators climbed more than forecast in November, and consumer sentiment improved this month. Oil supplies fell the most in a decade last week, the Energy Department said Dec. 21.
“There’s better economic news, slightly better sentiment out of the U.S., and that obviously has a big impact on crude- oil prices,” said Gavin Wendt, senior resource analyst at Mine Life Pty in Sydney.
Crude for February delivery was at $99.87 a barrel, up 34 cents, in electronic trading on the New York Mercantile Exchange at 1:28 p.m. Singapore time. The contract yesterday rose 86 cents to $99.53, the highest settlement since Dec. 13. Prices are up 6.7 percent this week, the biggest gain since the period ended Oct. 28. Futures have climbed 9.3 percent this year after increasing 15 percent in 2010.
Brent oil for February was trading at $107.80 a barrel, down 9 cents, on the London-based ICE Futures Europe exchange. The European contract’s premium to Nymex crude was $7.90 a barrel, compared with a close yesterday of $8.36 that was the smallest differential since March 8. The spread surged to a record $27.88 on Oct. 14.
U.S. Economy
U.S. initial unemployment claims fell by 4,000 to 364,000 last week, Labor Department figures showed yesterday. The Conference Board’s gauge of the outlook for the next three to six months rose 0.5 percent, versus a median forecast of 0.3 percent in a Bloomberg survey. The Thomson Reuters/University of Michigan final index of consumer sentiment increased more than expected in December.
Crude may rise next week on speculation that sanctions against Iran could curb supply from the world’s third-largest oil exporter, a separate Bloomberg survey showed.
Twelve of 32 analysts, or 38 percent, forecast oil will gain through Dec. 30. Ten respondents, or 31 percent, predicted prices will drop and 10 estimated there will be little change. Oil is up 26 percent this quarter, the biggest gain since the second quarter of 2009.

Iran Sanctions

The European Union and the U.S. are seeking support from the Middle East and Asia for sanctions to increase pressure on Iran to abandon a suspected nuclear weapons program. Iran’s navy will hold 10 days of maneuvers east of the Strait of Hormuz, state-run Fars news agency reported yesterday, citing Navy Commander Habibollah Sayari.
“If there are sanctions, that will be supportive,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong. “If there is a response by Iran or if tensions escalate then that would be even more supportive.”
About 15.5 million barrels of oil a day, or a sixth of global consumption, flows through the waterway between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Department of Energy. Sayari said Iran’s military has the capability to “control” the strait, according to a second Fars report. Whether it chooses to close the channel “depends on the decision of Iran’s higher officials,” he said.
EU foreign ministers are scheduled to meet next month to discuss sanctions. Iran, which exports more crude than any nation except Saudi Arabia and Russia, denies trying to develop nuclear weapons.
http://www.bloomberg.com/news/2011-12-22/oil-heads-for-biggest-weekly-gain-in-two-months-on-u-s-economic-reports.html