Crude Oil Rises a Second Day on Signs Sanctions Are Cutting Iran Exports

Oil rose for a second day in New York on signs that sanctions on Iran are succeeding in cutting the nation’s crude exports.

Futures climbed as much as 0.9 percent, adding to yesterday’s 1.4 percent increase. U.S. lawmakers proposed new measures against Iran’s nuclear program, while Barclays Capital said shipments from the Persian Gulf nation have dropped by 300,000 to 400,000 barrels a day. The European Union offered on March 6 to restart negotiations with the Islamic Republic.

“The consensus is that the EU embargo and U.S. sanctions are having a higher-than-expected impact,” said Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland. “On Iran now we have to wait a little bit to see the feeling coming out of the pre-negotiations.”

Oil for April delivery gained as much as $1 to $107.16 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.76 at 12:56 p.m. London time. Prices are 8 percent higher this year.

Brent oil for April settlement was at $125.16, up $1.04 on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate increased to as much as $18.50, the most since Feb. 13, after U.S. gasoline demand weakened and crude stockpiles at Cushing, Oklahoma, climbed to the highest level since July. The spread advanced to $17.96 yesterday, the widest gap based on closing prices since Feb. 10.

Iran Conflict

Oil has climbed this year amid concern European and U.S. sanctions against Iran will lead to military conflict in the Middle East, home to more than half the world’s oil.

Shipments from Iran have declined because sanctions are preventing the Islamic Republic from selling oil, Amrita Sen, an analyst at Barclays Capital in London, said yesterday by e-mail. Half of the tankers booked to load at the country’s largest terminal last month didn’t complete the voyages, according to brokers, company officials and ship-tracking data.

Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, pumped 3.45 million barrels a day last month, the lowest level since September 2002, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates.

Saudi Arabia is the biggest OPEC producer, with output of 9.7 million barrels a day last month.

Draft Legislation

Proposed legislation by U.S. Representative Brad Sherman, a California Democrat, and Senator Mark Kirk, an Illinois Republican, would penalize underwriters that insure or reinsure any deals with Iran banned under U.S. law, including oil and gas investments. The draft bill, obtained yesterday, would mostly affect Asia-Pacific or Russian underwriters as European insurers have scaled back coverage of Iran-related deals.

U.S. crude oil stockpiles gained 832,000 barrels last week, data from the Energy Department showed. They were forecast to increase 1.5 million barrels, according to the median of 10 analyst estimates in a Bloomberg News survey. Supplies at Cushing, the delivery point for New York-traded oil, rose 2.4 million barrels to 36.2 million.

Gasoline supplied by refiners, a proxy for demand, fell 1.2 percent to 8.3 million barrels a day, the Energy Department report showed. Inventories of the motor fuel decreased 396,000 barrels, compared with a forecast drop of 1.6 million. Distillate supplies, which include heating oil and diesel, declined 1.94 million barrels. They were estimated to fall 1.65 million barrels.

Oil may decline in the second quarter on weakening seasonal demand, an economic slowdown in China and an easing in Middle East tension, according to Gordon Kwan, Mirae Asset Securities Ltd.’s head of energy research in Hong Kong. Brent will average $115 this year, he said. Kwan was the most accurate forecaster of New York crude out of 26 analysts ranked by Bloomberg in the eight quarters ended June 2011.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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

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