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Oil Set for Best Monthly Advance Since October on Recovery Signs, Iran

Oil rose, heading for its best month in New York since October, amid signs of economic recovery and concern that tension with Iran threatens global crude supplies.

West Texas Intermediate futures climbed as much as 0.8 percent after sliding yesterday the most in five weeks. Industrial output in Japan and South Korea beat estimates and U.S. consumer confidence rose to the highest level in a year. Oil has advanced 8.6 percent in February, its first monthly gain in three, as sanctions tighten against Iran, OPEC’s second- biggest producer.

Oil prices will run up further as U.S. economic data remains supportive, and Iran and Syria continue to give cause for supply-side worries,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who earlier this month correctly predicted Brent crude’s rise to $120 a barrel.

Crude for April delivery increased as much as 88 cents to $107.43 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.98 at 12:25 p.m. London time. Yesterday, the contract slipped $2.01, or 1.9 percent, to $106.55, the lowest close since Feb. 22 and the biggest drop since Jan. 20.

Oil in New York has technical resistance at $114.96 a barrel, according to data compiled by Bloomberg. That’s the 76.4 percent Fibonacci retracement of crude’s rally from $10.35 in December 1998 to a record high of $147.27 in July 2008. Futures in May last year halted an advance below that level. Sell orders tend to be clustered close to chart resistance.

Brent oil for April settlement advanced $1.01 to $122.56 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to WTI was at $15.56, compared with $15 yesterday and a record $27.88 on Oct. 14.

Inventory, Economic Outlook

The Department of Energy is scheduled to release U.S. oil inventory and production statistics at 10:30 a.m. Washington time today, after an industry-funded report late yesterday showed crude stockpiles increased last week.

U.S. consumer confidence rose to the highest since February 2010, the New York-based Conference Board said yesterday. Japan’s factory output increased 2 percent in January, and South Korea’s industrial production rose 3.3 percent, according to the nations’ governments today. All the increases beat the median economist estimates in Bloomberg surveys.

Building Sanctions

New York crude has advanced this year as the West builds sanctions against Iran. Many countries are curtailing purchases of oil from the country and the U.S. anticipates “a very hard- nosed negotiation” with Iran over its nuclear program, Secretary of State Hillary Clinton told the Senate Foreign Relations Committee yesterday.

Iran has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s crude, in response to an embargo. The Obama administration is in talks with the International Energy Agency as the U.S. considers using its Strategic Petroleum Reserve on concern the Persian Gulf nation may interrupt oil supply, pushing gasoline prices higher, Energy Secretary Steven Chu said yesterday.

The sanctions have helped boost Iranian crude prices 15 percent in 2012, while U.S. gasoline at the pump has risen to the highest for this time of year since the Energy Department started compiling records in 1973. Prices for motorists averaged $3.721 a gallon, up 10 percent from a year earlier, according to department data on Feb. 27.

Durable Goods

Iran produced 3.5 million barrels of oil a day last month, according to estimates compiled by Bloomberg. Saudi Arabia, the biggest member in the Organization of Petroleum Exporting Countries, pumped 9.7 million barrels a day.

Oil tumbled yesterday after the U.S. Commerce Department said orders for durable goods dropped 4 percent in January, the most in three years.

“The U.S. economy is one of moderate growth,” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said in a telephone interview today. “The Iranian situation is still there and is likely to limit the extent of any downside.”

U.S. crude inventories climbed 521,000 barrels last week, the American Petroleum Institute said after the settlement. A government report today may show they gained by 1.1 million, according to a Bloomberg survey. Supplies at Cushing, Oklahoma, the delivery point for New York futures, rose 1.64 million barrels to 33.8 million, data from the industry-funded API showed. Distillate fuel inventories fell 3.31 million barrels and gasoline stockpiles dropped 916,000 barrels, it said.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

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

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