Oil Rises on Iran Tension, European Effort to Ease Sovereign-Debt Crisis

Oil rose for a second day in New York on concern that tension in the Middle East threatens supplies and speculation that Europe will take steps to tame a debt crisis that may curb economic growth.

West Texas Intermediate oil gained as much as 0.8 percent, after posting the first weekly increase in three. Iran said crude will surge above $250 a barrel if nations threaten to ban its purchases, according to the Shargh newspaper. European leaders will hold meetings this week as U.S. Treasury Secretary Tim Geithner visits the region. Italian Prime Minister Mario Monti yesterday announced 30 billion euros ($40 billion) of austerity and growth measures.

“The Iranian tension is the main reason for driving WTI back to $100 a barrel, because it’s not really in our opinion being driven by improved demand expectations in the near term,” Colin Whitehead, an analyst at Fat Prophets in Sydney, said. “If supply concerns pull back, we’d expect to see oil pull back into the low $90s.”

Crude for January delivery climbed as much as 77 cents, or 0.8 percent, to $101.73 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.52 at 3:27 p.m. Singapore time. Prices gained 4.3 percent last week, the first increase since the period ended Nov. 11, and are up 14 percent the past year.

Brent futures for January settlement rose 91 cents, or 0.8 percent, to $110.85 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $9.33 a barrel to the U.S.-traded West Texas Intermediate grade.

Iran Tension

Even verbal threats to block exports of Iranian oil will cause crude prices to increase, Ramin Mehmanparast, a Foreign Ministry spokesman, told Tehran-based Shargh in an interview published yesterday. Iran pumped 5 percent of the world’s oil last year, according to BP Plc’s Statistical Review of World Energy.

The European Union added 180 Iranian officials and companies to a blacklist on Dec. 1 to try to pressure the world’s third-largest crude exporter to curtail its nuclear program. The U.S., U.K. and Canada announced measures on Nov. 21 making it harder for President Mahmoud Ahmadinejad’s government to receive payments for crude exports, though they stopped short of banning trade in Iranian oil.

“Geopolitical problems are very difficult to forecast,” Dominic Schnider, the global head of commodity research for UBS AG’s wealth-management unit in Singapore, said in a Bloomberg television interview. “What you can say is prices are unlikely to really drop heavily, given the uncertainty.”

Hedge Fund Bets

Hedge funds and other large speculators increased wagers on rising crude prices by 2.6 percent in the seven days ended Nov. 29, according to the Commodity Futures Trading Commission’s Commitments of Traders report Dec. 2. They had cut so-called long positions, bets on rising oil, by the most since August the previous week, the Washington-based CFTC said.

U.S. Treasury Secretary Timothy Geithner arrives in Frankfurt tomorrow to meet with political leaders and central bankers. The European Central Bank has a policy meeting Dec. 8 and a European summit will be held Dec. 9.

“If Europe were to turn around and categorically resolve their problems, then that would be positive for oil, but that’s highly unlikely to occur,” said Whitehead. “It’s probably going to be more positive statements without too much action.”

To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net

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

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