Oil Trades Near Three-Month High on U.S. Supply, Europe Debt Outlook

Oil rose to the highest price in more than three months in New York on signs of shrinking stockpiles in the U.S. and amid speculation European leaders will make progress in containing the region’s debt crisis.

Futures advanced for a fifth day, gaining as much as 1.1 percent. Crude supplies at Cushing, Oklahoma, fell 4.4 percent in the first three days of the month, data from DigitalGlobe Inc. showed. Prices also gained amid speculation Iran’s nuclear plans may threaten Middle East stability. Greek Prime Minister George Papandreou will resume talks today on forming a government, while Italy’s Silvio Berlusconi faces a vote that will determine if he has the support to stay in power.

“Italy is too big to save, and too big to fail, so whatever happens there will have an impact on sentiment across the board,” said Ole Hansen, senior manager of trading advisory at Saxo Bank A/S in Copenhagen. “Until we have additional news out of Italy on the economic side, it seems technically driven, and also with worries on the supply side.”

Crude for December delivery on the New York Mercantile Exchange rose as much as $1.08 to $96.60 a barrel, the highest price since Aug. 1, and was at $96.12 at 1:03 p.m. London time. Yesterday, the contract advanced $1.26, or 1.3 percent, to $95.52, the highest settlement since July 29. Prices have gained 5.2 percent this year.

Brent oil for December settlement on the London-based ICE Futures Europe exchange was up 89 cents at $115.45 a barrel. The premium of the European contract to New York crude increased 1.5 percent to $19.33 a barrel, after widening 7.5 percent yesterday, the most since Sept. 30. The spread settled at a record-high $27.88 on Oct. 14.

Iran Premium

A report this week may show International Atomic Energy Agency inspectors have concluded for the first time that Iran is working toward making nuclear weapons, which could increase the risk of a military attack on Iran’s nuclear facilities, according to analysts at Commerzbank AG.

“We believe this justifies a certain risk premium on the price of oil,” Eugen Weinberg, the Frankfurt-based head of commodity research at the bank, said in a report today.

Iran is the second-largest oil producer, behind Saudi Arabia, in the Organization of Petroleum Exporting Countries. The 12-member group, which pumps about 40 percent of the world’s crude, is due to publish its annual world oil outlook later today. The International Energy Agency, the Paris-based adviser to oil-consuming nations, will publish its projections for global energy markets tomorrow.

Italy Vote

Today’s vote in Rome today will determine if Berlusconi has enough support to stay in power and implement austerity measures. The European Central Bank’s Juergen Stark predicted yesterday the debt crisis will be controlled within two years.

In Greece, Premier Papandreou resumed talks with his opposition rival in Athens today as they moved closer to agreement on naming the premier of a unity government to secure a resumption of international aid.

Oil supplies held in floating-roof tanks at Cushing, the delivery point for New York-traded crude, dropped 1.32 million barrels to 28.3 million on Nov. 3, compared with Nov. 1, according to satellite images taken by Longmont, Colorado-based DigitalGlobe. An Energy Department report tomorrow may show total U.S. crude inventories climbed 250,000 barrels last week, according to the median estimate of 10 analysts surveyed by Bloomberg News. The industry-funded American Petroleum Institute will release its own stockpile data today.

As the 2011 Atlantic hurricane season entered its final weeks, subtropical Storm Sean formed midway between the Bahamas and Bermuda, the National Hurricane Center in Miami said today. The 18th named storm this season was moving northeast at 6 miles per hour.

Crude in New York has technical support at about $94.90 a barrel, the 50 percent Fibonacci retracement of the price drop from the 2011 high in May to the October low, according to data compiled by Bloomberg. This level is also near the 200-day moving average that was surpassed at yesterday’s settlement. Buy orders tend to be clustered near chart-support levels.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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