Futures rose 1.3 percent as Italian Prime Minister Silvio Berlusconi faced pressure to quit as the country’s 10-year borrowing costs approached the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. Greek Prime Minister George Papandreou agreed to resign to allow a national unity government to secure outside financing.
“Supply and demand are taking a backseat to political factors,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “The current system in Europe is struggling to come to terms with the financial difficulties in Italy, Greece, Portugal and Spain. There’s a feeling that a change in political leadership may be the needed answer.”
Crude oil for December delivery rose $1.26 to $95.52 a barrel on the New York Mercantile Exchange, the highest settlement price since July 29. Futures are up 10 percent from a year earlier.
Brent oil for December settlement climbed $2.59, or 2.3 percent, to end the session at $114.56 on the London-based ICE Futures Europe exchange. The European benchmark settled at the highest level since Oct. 14. The difference between Nymex crude and Brent widened to $19.04 today. The spread is down 32 percent from a record high of $27.88 on Oct. 14.
Italy’s parliament votes tomorrow on last year’s budget report. Two Berlusconi allies defected to the opposition last week and a third quit yesterday. Giuliano Ferrara, editor of newspaper Il Foglio and a former Berlusconi spokesman, reported that the premier may step down. Berlusconi denied the report.
Greece’s Papandreou and Antonis Samaras, head of the main opposition party, agreed to form a government to lead Greece “to elections immediately after the implementation of European Council decisions,” according to an e-mail from the office of President Karolos Papoulias in Athens.
“The market is trading on the most recent headlines from Italy and Greece,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “We were able to reach a new high earlier today and it looks like it will continue to test the upside.”
European Central Bank Executive Board member Juergen Stark said he expects the euro-area debt crisis to be “under control” within two years. Stark was speaking at an event today in Lucerne, Switzerland.
European finance chiefs returned to Brussels today in an effort to convince global leaders that they can shield countries such as Italy and Spain from the debt crisis with their bailout fund. Finance ministers from the 17-member euro area are working on the details of plans to increase the muscle of the European Financial Stability Facility. Leveraging the fund would aim to ramp up spending capacity to 1 trillion euros ($1.4 trillion).
“There’s buying on the fact that Greece may soon have a government of national unity,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “The strong dollar today is keeping oil from moving higher.”
The euro dropped 0.2 percent to $1.3769 at 3:19 p.m. in New York. A weaker euro usually reduces the appeal of commodities as an alternative investment to the U.S. dollar.
Oil traders are also awaiting the release of a United Nations report this week that may trigger action against Iran, the second-biggest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.
The International Atomic Energy Agency is scheduled to publish its quarterly report on Iran’s nuclear work this week, and inspectors are expected to conclude for the first time that Iran is developing nuclear weapons.
Iran is moving closer to acquiring a nuclear weapon after a Russian scientist showed Iranians techniques that could make smaller atomic weapons capable of bigger explosions, according to three officials with knowledge of the document who have been briefed on the UN atomic agency’s eight-year probe.
The officials spoke on the condition of anonymity, following diplomatic rules for discussing private information.
About 15.5 million barrels of oil a day, the equivalent of about a sixth of global consumption, flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department.
Oil volume in electronic trading on the Nymex was 532,943 contracts as of 3:10 p.m. in New York. Volume totaled 517,985 contracts Nov. 4, 25 percent below the three-month average. Open interest was 1.35 million contracts.
To contact the reporter on this story: Mark Shenk in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Dan Stets at email@example.com