Oil rose for a second day as U.S. builders broke ground on more houses than at any time in the past 19 months and on speculation that further sanctions against Iran will curb supply.
Prices gained 3.6 percent after the Commerce Department reported housing starts increased 9.3 percent last month to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg. Oil also rose as participants at a meeting in Rome vowed to increase pressure on Iran, the world’s No. 3 crude exporter, over its nuclear program.
“The housing starts number is telling us that the U.S. economy is again making modest improvements,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “Iran can cause short-term dislocation in the market.”
Crude for January delivery gained $3.34 to settle at $97.22 a barrel on the New York Mercantile Exchange. The contract expires today. Prices are 6.4 percent higher this year after rising 15 percent in 2010. The more actively traded February contract rose $3.19 to $97.24.
Futures advanced in electronic trading after the settlement. The American Petroleum Institute reported that oil inventories fell 4.57 million barrels to 330 million last week. February crude gained $3.47, or 3.7 percent, to $97.52 a barrel in electronic trading at 4:39 p.m.
Brent oil for February settlement on the London-based ICE Futures Europe exchange increased $3.09, or 3 percent, to settle at $106.73.
‘Road to Recovery’
November housing starts were the most since April 2010. The median estimate of 79 economists surveyed by Bloomberg called for a gain to 635,000. Building permits, a proxy for future construction, climbed to a 681,000 annual pace in November, the highest level since March 2010.
“In the U.S., the economy is on the road to recovery, with falling unemployment and consistently improving growth against a background of low and falling oil stockpiles,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London.
U.S. crude inventories fell by 2.13 million barrels last week, according to the median estimate of 12 analysts surveyed Bloomberg News. The Energy Department will report on stockpiles at 10:30 a.m. tomorrow in Washington.
U.S. equities also gained after the economic reports were released. The Standard & Poor’s 500 Index rose 3 percent and the Dow Jones Industrial Average added 2.9 percent.
Pressure on Iran
Participants in what was described as a meeting of “like-minded nations” asked Iran “to satisfy requests by the international community for immediate clarification on the nuclear program,” the Italian Foreign Ministry said today in an e-mailed statement.
“It’s an important meeting, but a preparatory one,” said Cliff Kupchan, an analyst at New York-based research company Eurasia Group. Its purpose is “to prepare for an EU embargo of Iranian oil, which will probably be announced in January.”
The European Union added 180 Iranian officials and companies to a blacklist this month to intensify pressure on Iran over its nuclear program, after the U.S. imposed stiffer penalties in November.
Iran is the second-largest member of the Organization of Petroleum Exporting Countries, after Saudi Arabia. The country pumped about 5 percent of the world’s oil last year, based on BP’s annual Statistical Review of World Energy. Only Saudi Arabia and Russia export more crude.
Oil also advanced as the euro strengthened against the dollar after Spain’s borrowing costs dropped at a sale of three-and six-month bills.
“Some of the worries about Europe are once again receding,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market has some support because of geopolitical tension and fears of supply disruption.”
Data from Germany indicated Europe’s largest economy is weathering the region’s debt crisis. The nation will probably avoid a recession, two economic institutes that advise Chancellor Angela Merkel’s government said, and the Ifo institute reported an unexpected gain in business confidence.
The euro rose 0.6 percent against the dollar to $1.3079. The Dollar Index, which tracks the U.S. currency against six major peers including the euro and the yen, slid 0.6 percent. A weaker dollar increases oil’s appeal as an investment alternative.
Oil output in Kazakhstan may be affected by riots in the western town of Zhanaozen, according to Commerzbank AG. Riots spread this weekend in the Mangistau region. The area accounts for 25 percent of the country’s oil production of 1.6 million barrels a day, Commerzbank said.
Oil volume in electronic trading on the Nymex was 393,826 contracts as of 4:37 p.m. in New York. Volume totaled 438,986 contracts yesterday, the lowest level since Nov. 25. Open interest was 1.3 million contracts.