March 23 (Bloomberg) -- Oil climbed after Reuters reported Iranian oil exports will drop by 300,000 barrels a day this month because of tighter sanctions.
Futures gained 1.4 percent on the New York Mercantile Exchange after earlier spiking more than 2 percent in three minutes, following the report, which cited Petrologistics, a Geneva-based consulting company. Stephen Schork, president of the Schork Group in Villanova, Pennsylvania, said the gain may have triggered traders’ automatic buy orders.
“The Reuters item came out at the same time we spiked,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “It doesn’t look like much, but it’s a reminder that the tensions will probably only increase. If there is a cutoff of Iranian oil, the Saudis will have a hard time making up for the lost supply.”
Crude oil for May delivery rose $1.52 to settle at $106.87 a barrel on the Nymex. It touched $108.25 a barrel, the highest intraday price since March 2. Futures dropped 19 cents this week and are up 8.1 percent this year.
Brent oil for May settlement gained $1.99, or 1.6 percent, to end the session at $125.13 a barrel on the London-based ICE Futures Europe exchange.
Oil has risen as Western countries imposed sanctions on Iran’s petroleum exports to halt its nuclear program. The Persian Gulf country threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil, in retaliation. Futures fell earlier this week as Saudi Arabia said it could boost output immediately to make up for any supply shortfall.
“This goes to show how nervous and twitchy this market is,” said Mike Wittner, head of oil market research at Societe Generale in New York. “The Iranian headlines aren’t even new news. We knew last month that European refiners were cutting back on deliveries of Iranian crude.”
Iran halted crude sales to buyers in France and the U.K. to preempt a European Union ban on imports, the Shana oil ministry news website reported on Feb. 20. Shipments have declined by 300,000 to 400,000 barrels a day because sanctions are preventing Iran from selling oil, Amrita Sen, an analyst at Barclays Capital in London, said March 7 by e-mail.
Petrologistics reported exports from Iran may drop to 1.9 million barrels a day in March, Reuters said.
Iran exported just below 2 million barrels a day last month, compared with 2.6 million in November, the International Energy Agency, adviser to 28 industrialized nations, said last week. Shipments will fall by at least 800,000 barrels a day when sanctions take full effect, David Fyfe, head of the IEA’s market and industry division, said by phone from Paris on March 14, citing discussions with market participants.
Oil jumped $2.35 between 9:54 a.m. and 9:55 a.m. on the Nymex. Analysts and brokers said the increase touched off by the Iran headlines may have triggered programs set to buy oil when prices reached predetermined levels. Crude had pared the rally by $1.72 as of 9:59 a.m.
“That headline just helped trigger a few computer-generated buy stops,” Tony Machacek, a broker at Bache Commodities Ltd. in London, said by e-mail. “It came back off almost as quickly as it went up.”
A buy stop is an order to purchase the commodity when the price exceeds a certain point. They are placed based on traders’ assessments that the futures will gain upward momentum after breaching that level.
Saudi Arabian Oil Minister Ali al-Naimi said on March 20 that the kingdom can boost output by 25 percent. The country’s crude production capacity is 12.5 million barrels a day and it will pump about 9.9 million barrels a day this month and in April, al-Naimi said in Doha, Qatar. The global market is oversupplied by as much as 2 million barrels a day and inventories are rising, he said.
“Going into the weekend I think it is going to be tough to short this thing,” Schork said.
Electronic trading volume on the Nymex was 445,555 contracts as of 2:37 p.m. in New York. Volume totaled 539,283 contracts yesterday, 15 percent below the three-month average. Open interest was 1.55 million.
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