Oil Trades Near Nine-Month High on Iran Tension

Oil traded near the highest price in nine months in New York after euro-area finance ministers agreed on a second bailout for Greece.

Crude advanced as much as 2.1 percent from its Feb. 17 settlement. There was neither floor trading nor a closing price yesterday in the U.S. because of the Presidents’ Day holiday. Brent, the benchmark for half the world’s oil, was little changed in London after Europe Union finance ministers awarded 130 billion euros ($173 billion) in aid to Greece.

“The Greek bailout was priced into oil because it was expected that a deal would be approved,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Brent is overbought. We have some geopolitical issues in Iran and Syria but OPEC is producing at record levels and output from Libya is increasing.”

Oil futures for March delivery on the New York Mercantile Exchange, which expire today, rose as high as $105.44, up $2.20 from the Feb. 17 close and the highest price since May 5. They were at $104.59 at 1 p.m. London time, while the more-actively traded April contract was at $104.90, up $1.30. Today’s trades will be booked with yesterday’s electronic transactions for settlement.

Brent oil for April settlement on the ICE Futures Europe exchange in London was down 22 cents, or 0.2 percent, at $119.83 after rising yesterday to as much as $121.15, the highest since June 15. The European benchmark contract’s premium to New York- traded West Texas Intermediate was at $14.93, compared with this year’s widest spread of $19.02 on Feb. 6.

Iran-China Deal

Oil pared gains after China International United Petroleum & Chemical Co., the trading unit of China’s largest refiner, agreed terms of a 2012 crude-supply deal with Iran, according to three people with knowledge of the negotiations.

Data released earlier today by the General Administration of Customs showed China, the biggest buyer of Iranian crude, cut purchases in January to the lowest level in five months after oil companies in the two nations failed to renew contracts. Crude imports were 2.08 million metric tons, or about 493,000 barrels a day, according to Bloomberg calculations from the data. That was down 5 percent from a year ago and 14 percent from December.

Supplies to India

Iran offered India extra crude supplies on revised terms as international sanctions tightened the Middle East producer’s circle of oil customers, according to three people with knowledge of the talks. Indian refiners have yet to decide on whether they will take up Iran’s offer of additional shipments, the people said. The South Asian nation’s government is open to increasing oil imports from the Persian Gulf state, according to two of the people.

The EU said yesterday that member countries are cutting oil purchases from Iran and have sufficient reserves to deal with disruptions. The EU agreed to stop purchases of Iranian crude starting July 1 in a move to punish the Persian Gulf country’s nuclear program.

Iran is unlikely to close the Strait of Hormuz, said Amrita Sen, a commodities analyst at Barclays Plc in London.

“We’ve talked about Hormuz, which we don’t think will happen. That could take it to $150 or even higher,” Sen said in interview with Mark Barton on Bloomberg Television’s “On the Move” program. “An Israeli strike on Iranian production would be much worse.”

UN Investigators

United Nations investigators are starting two days of meetings in Iran, offering Tehran a chance to stem speculation that its nuclear program will spark a military conflict. Iran’s oil-ministry news website Shana reported Feb. 19 that the nation will cut supplies to the U.K. and France.

Iran’s attempt to preempt a European Union import ban will have “no impact on Britain’s energy security or supplies,” U.K. Foreign Secretary William Hague said yesterday in London. The U.K. got 1 percent of its crude from Iran in the first half of 2011 and France got 4 percent, according to the U.S. Energy Administration.

“We imagine this was met by our friends in London with a general shrug,” Stephen Schork, president of the Schork Group in Villanova, Pennsylvania, said in a note today. He estimates that 22 percent of Iranian crude exports are purchased by China, while Japan buys 14 percent. “Until we see one of these buyers affected, Iran will remain mostly bark and little bite.”

Hedge-funds and other money managers raised bullish bets on Brent crude by 6,818 contracts, or 7.5 percent, in the week ended Feb. 14, data yesterday from the ICE Futures Europe exchange showed.

To contact the reporters on this story: Ann Koh in Singapore at akoh15@bloomberg.net; Ayesha Daya in Dubai at adaya1@bloomberg.net

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

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