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Oil Rises for Second Day on Iran Tension, European Efforts to Ease Crisis

Oil rose for a second day in New York on concern that tension in the Middle East threatens supplies and as investors bet that European leaders will take steps to tame the region’s debt crisis.

West Texas Intermediate oil gained as much as 1 percent, after posting the first weekly rise in three. Iran said crude will surge to more than $250 a barrel if nations threaten to ban its exports, according to the Shargh newspaper. European leaders meet this week as U.S. Treasury Secretary Timothy F. Geithner visits the region. Hedge funds and other money managers raised bullish bets on Brent by 26 percent in the week ended Nov. 29.

“Iran is contributing to the strength today,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London who predicts Brent, the European benchmark, will rise to $115 by the end of the year. “As long as you don’t think about Europe, there are plenty of reasons to envisage higher prices in the first quarter. Demand from developing economies makes a price collapse unlikely.”

Crude for January delivery climbed as much as 96 cents to $101.92 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.61 at 1:05 p.m. London 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 were at $111.04 after rising as much as $1.28, or 1.2 percent, to $111.22 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $9.31 a barrel to the U.S.-traded West Texas Intermediate grade.

Iran Tension

Even verbal threats to block exports of Iranian oil will cause 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.

Money managers and hedge funds raised bullish bets on Brent crude by 14,833 contracts, or 26 percent, in the week ended Nov. 29, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 72,356 lots, the London-based exchange said today in its weekly Commitment of Traders report.

Timothy F. 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.

To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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