Oil Rises as German Confidence Jumps, France Seeks Faster Iran Sanctions

Oil rose for the first time in four days as German investor confidence jumped the most on record and as France pushed for faster enforcement of the European Union’s proposed ban on oil imports from Iran (OPCRIRAN).

Oil gained 2 percent after the ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations surged 32.2 points in January. France wants the embargo to be delayed by no more than three months, two officials with knowledge of the matter said.

“It looks like a recession in Europe is less likely now and people are feeling more bullish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The pressure against Iran remains high despite the delay.”

Crude for February delivery rose $2.01, or 2 percent, to settle at $100.71 a barrel on the New York Mercantile Exchange. Floor trading was shut yesterday for the U.S. Martin Luther King Jr. holiday. Prices have advanced 17 percent in three months.

Brent oil for March settlement increased 19 cents to $111.53 a barrel on the London-based ICE Futures Europe exchange.

The German index, which predicts economic developments six months in advance, surged to minus 21.6 from minus 53.8 in December, its second straight gain, according to the ZEW center. The increase is the biggest since ZEW started the index two decades ago. Economists forecast a reading of minus 49.4, according to a Bloomberg News survey.

Shorter Delay Sought

France is seeking a shorter exemption for crude contracts with Iran even as other EU members favor a six-month delay, according to an EU diplomat, who asked not to be identified because the talks are confidential.

EU foreign ministers are scheduled to decide at a Jan. 23 meeting on the ban, which will probably include an exemption for Eni SpA, Italy’s largest oil company. An embargo requires unanimous approval by the bloc’s 27 states.

Iran, OPEC’s second-largest producer, has threatened to block oil shipments through the Strait of Hormuz in retaliation against international sanctions.

Oil also gained after Saudi Arabian Oil Minister Ali al- Naimi said yesterday the nation aims to stabilize the average crude price worldwide at $100 a barrel in 2012. The Saudis can make up for any loss of output if sanctions are placed on Iran, al-Naimi said in a CNN interview.

‘Not Going Away’

“The embargo story is certainly not going away,” said David Lennox, a resource analyst at Fat Prophets in Sydney who forecasts U.S. crude will average $110 a barrel this year. “The Saudis came out and said they were looking to target oil at about $100 a barrel. I suspect that’s what the driver has been.”

The kingdom can produce 12.5 million barrels a day and has a current output of about 9.8 million, al-Naimi said. Iran produced 3.58 million barrels in December and Saudi Arabia 9.65 million, according to estimates compiled by Bloomberg.

The minister said he doesn’t expect the Strait of Hormuz to be shut for an extended period. The waterway is a transit route for almost one-fifth of global oil trade, according to the U.S. Energy Department.

Iranian Foreign Minister Ali Akbar Salehi called on Saudi Arabia to be more “wise” after al-Naimi’s comments, according to the state-run Fars news agency.

China Growth Slows

Oil also rose with U.S. equities on speculation that China will take steps to boost growth after its economy grew at the slowest rate in more than two years. Gross domestic product in China, the world’s second-largest oil consumer after the U.S., grew 8.9 percent in the fourth quarter from the previous year.

The Standard & Poor’s 500 Index gained 0.4 percent. The Dow Jones Industrial Average added 0.5 percent.

“It certainly has been a situation where crude and equities pretty much moved in lockstep,” said Kyle Cooper, director of research for IAF Advisors in Houston.

China’s refineries boosted crude processing to a record in December because of a domestic diesel shortage, data from the statistics bureau showed today.

The euro rose for the first time in three days against the dollar as Spanish and Greek borrowing costs fell at auctions, damping concern the region’s most-indebted nations will struggle to fund their deficits.

The European currency increased 0.5 percent to $1.2734 at 3:58 p.m. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.

Oil volume in electronic trading on the Nymex was 710,924 contracts as of 3:49 p.m. in New York. Volume totaled 775,449 on Jan. 13, 29 percent above the three-month average and the highest level in a month. Open interest was 1.39 million contracts.

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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