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Oil Rises on U.S. Economic Data, Decision on Sanctions

Oil climbed, capping a second quarterly gain, after reports showed U.S. consumer sentiment and spending rose and President Barack Obama cleared the way for new sanctions targeting Iran.

Futures increased 24 cents as an index of consumer sentiment rose in March and U.S. purchases gained the most since July. Crude reached its intraday peak when Obama determined that world oil supplies were sufficient to proceed with sanctions on banks in countries that import Iranian oil.

“The economic numbers today were mostly bullish,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “They point to pretty solid growth of both the economy and demand.”

Crude oil for May delivery settled at $103.02 a barrel on the New York Mercantile Exchange. Prices increased 4.2 percent for the quarter after a gain of 25 percent in the last quarter of 2011.

Brent oil for May settlement gained 49 cents, or 0.4 percent, to end the session at $122.88 a barrel on the London- based ICE Futures Europe exchange. The contract climbed 14 percent this quarter. The European benchmark contract’s premium to New York-traded West Texas Intermediate oil was at $19.86, the most at the close since Oct. 24.

The Thomson Reuters/University of Michigan consumer sentiment index rose to 76.2 from 75.3 at the end of last month. It was projected to come in at 74.5 after a preliminary figure of 74.3, according to the median of 63 estimates from economists in a Bloomberg News survey.

U.S. consumer purchases gained 0.8 percent in February, the Commerce Department said, exceeding the 0.6 percent median gain forecast in a Bloomberg News survey of economists.

Additional Sanctions

Obama’s decision cleared the way for the imposition of congressionally mandated sanctions, according to a memorandum released by the White House. The law allows banks that settle petroleum-related transactions through Iran’s central bank to be cut off from the U.S. banking system.

Obama and world leaders including French President Nicolas Sarkozy are trying to use sanctions to keep Iran from developing nuclear weapons. Obama and Sarkozy are seeking re-election this year.

“This is a continuation of what we’ve been doing for a while,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion. “Obama and Sarkozy have the same problem. They want to hurt Iranian exports while preventing a spike in prices that hurts the global economy and their re-election campaigns.”

Oil in New York reached $110.55 on March 1, the highest level since May 4, amid speculation that Western sanctions would disrupt shipments from the Middle East.

‘Alarming’ Rhetoric

The Persian Gulf nation is breaching United Nations resolutions and increasing the size of its nuclear program amid an “alarming” escalation in global rhetoric toward its atomic plans, Russia’s Deputy Foreign Minister Sergei Ryabkov said yesterday in an interview in New Delhi.

Iranian (OPCRIRAN) crude output fell 65,000 barrels a day to 3.385 million this month, the lowest level since June 2002, according to a Bloomberg News survey of oil companies, producers and analysts. The Islamic republic is the second-biggest oil producing country in OPEC after Saudi Arabia.

Oil also rose as European officials agreed to increase a rescue lending fund to 800 billion euros ($1.07 trillion), according to a statement after a meeting in Copenhagen today. Efforts to raise it will succeed in tempering the debt crisis, German Finance Minister Wolfgang Schaeuble said yesterday.

Equities Gain

The Standard & Poor’s 500 Index rose 0.4 percent. The dollar was down 0.3 percent against the euro. A weaker dollar and stronger common currency boost the appeal of commodities as an investment alternative.

“The oil price rise today coincided with the dollar’s move lower,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “The U.S. economic data this morning gave the market a bit of a boost.”

Crude prices fell 2.5 percent yesterday, the biggest drop since December, and decreased 3.6 percent this week after U.S. stockpiles climbed to the highest level since August and Western countries discussed tapping emergency reserves.

“There appears to be a concerted effort to drive down the price of oil,” O’Grady said. “We will have to wait and see whether it will have the desired impact.”

Oil output in March by the Organization of Petroleum Exporting Countries rose to a three-year high, led by a Libyan production gain, the Bloomberg News figures show. Production increased by 110,000 barrels, or 0.4 percent, to 31.22 million barrels a day from a revised 31.11 million in February.

Electronic trading volume on the Nymex was 405,840 contracts as of 3:27 p.m. in New York. Volume totaled 578,776 contracts yesterday, 10 percent below the three-month average. Open interest was 1.56 million.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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