Crude Advances Amid Manufacturing Expansion, Tension Over Iran

Oil climbed in New York after manufacturing activity in China and India expanded, while concern persisted that further sanctions against Iran may disrupt supply.

Futures gained as much as 2.9 percent on the first trading day of 2012. India’s Purchasing Managers’ Index rose the most in six months in December, HSBC Holdings Plc and Markit Economics said yesterday, and a manufacturing index in China signaled expansion. Iran’s Deputy Navy Commander Rear Admiral Mahmoud Mousavi told Press TV that any effort to harm the nation’s interests will lead to “reciprocal measures.”

“Iran will probably be centre-stage this year, at least in the first half,” Amrita Sen, an analyst Barclays Plc in London, said in an interview on Bloomberg Television’s “The Pulse” with Maryam Nemazee. “The risks surrounding Iran are clearly rising. Demand could surprise to the upside, and I’d especially highlight China.”

Crude for February delivery advanced as much as $2.85 to $101.68 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.39 at 11:24 a.m. London time. Oil gained 8.2 percent in 2011, the third consecutive yearly gain.

Brent oil for February settlement rose $2.45, or 2.3 percent, to $109.83 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $8.66, compared with a record $27.88 on Oct. 14.

Brent’s premium to WTI has declined as Libya resumed production of light, sweet crude after last year’s uprising against Muammar Qadaffi. The nation exported a cargo of Es Sider grade from the port of the same name on Jan. 1, the National Oil Corp. said in a website notice. It is the first shipment of the blend from that location since the rebellion.

Iran Sanctions

Crude also rose as the U.S. and its allies increased pressure on Iran to halt what they say may be a covert nuclear weapons program. Sanctions signed into law by President Barack Obama on Dec. 31 aim to deter dealings with the Iranian central bank. The European Union, which is considering a ban on oil from Iran, will be ready by Jan. 30 to decide whether to extend sanctions, Michael Mann, a spokesman for the EU, said yesterday.

Iran, OPEC’s second-largest producer, doesn’t intend to disrupt shipping in the Strait of Hormuz, Mousavi said yesterday, according to Press TV. Almost 17 million barrels a day of crude moved through the channel last year, the U.S. Energy Department said in an update on “world oil transit chokepoints.” Saudi Arabia is the largest exporter in the Organization of Petroleum Exporting Countries and sends some oil shipments through the strait.

Manufacturing Growth

China’s purchasing managers’ index rose to 50.3 in December from 49 in November, the Beijing-based logistics federation said Jan. 1. A number above 50 indicates expansion. The country accounted for about 11 percent of the world’s oil consumption in 2010 and India for 4 percent, according to BP Plc’s Statistical Review of World Energy. The U.S. is the world’s biggest crude user at 21 percent.

“Iran is the wildcard,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin in Sydney. “There’s still concern that Iran, when pushed, will do something. The manufacturing data also provides a bit of confidence.”

German unemployment fell more than forecast in December as exports of cars and machinery boomed and one of the mildest winters on record helped support jobs in construction.

The number of people out of work fell a seasonally adjusted 22,000 to 2.89 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, the median of 20 estimates in a Bloomberg News survey showed. The adjusted jobless rate dropped to 6.8 percent.

Hedge funds expanded wagers on rising oil prices by 7.6 percent, or 13,585 contracts, to 192,446 in the seven days ended Dec. 27, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report last week.

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

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.