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Oil Trades Near Three-Day High After Bernanke Speech

Oil traded near the highest level in three days in New York on speculation fuel demand will rise after Federal Reserve Chairman Ben S. Bernanke signaled interest rates will be kept low enough to stimulate the U.S. economy.

Futures were little changed after rising a second day yesterday. “Continued accommodative policies” can accelerate the economic recovery and reduce unemployment, Bernanke said in a speech in Arlington, Virginia. U.S. crude stockpiles probably rose to a six-month high last week, a Bloomberg News survey showed. Prices have gained this year amid concern that tension with Iran will disrupt supplies.

“Oil is at these levels because Bernanke is going to keep interest rates lower,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney. “There’s this premium built into the price with Iran. The news that’ll push oil through $110 can only be one thing” and that’s a military strike, he said.

Oil for May delivery was at $106.89 a barrel, down 14 cents, in electronic trading on the New York Mercantile Exchange at 2:15 p.m. Sydney time. It gained 16 cents yesterday to $107.03, the highest close since March 21. Prices are 8.2 percent higher this year and headed for a second straight quarterly gain.

Brent oil for May settlement was at $125.45 a barrel, down 20 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $18.56.

Technical Support

Oil in New York has technical support at $103.39 a barrel, according to data compiled by Bloomberg. That’s a horizontal resistance line going back to May 31 last year, which was surpassed on Feb. 17. It also coincides with a Fibonacci retracement level on the weekly chart. Buy orders tend to be clustered near chart-support levels.

U.S. crude inventories increased 2.8 million barrels, rising for the fifth time in six weeks, according to the median of six analyst estimates in the Bloomberg News survey before tomorrow’s Energy Department report. Gasoline stockpiles fell 1.7 million barrels and distillate supplies, a category that includes heating oil and diesel, slid 250,000 barrels, the survey shows.

The American Petroleum Institute will release separate inventory data today. 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.

Monetary Outlook

Bernanke said yesterday that while he’s encouraged by the decline in the U.S. unemployment rate to 8.3 percent, continued accommodative monetary policy will be needed to make further progress. The Federal Open Market Committee on March 13 raised its assessment of the economy while repeating that interest rates are likely to be capped near current levels at least through late 2014.

German business confidence unexpectedly rose to an eight-month high in March. The Munich-based Ifo institute’s business climate index increased to 109.8 from a revised 109.7 in February. Economists forecast it would remain unchanged, according to a Bloomberg News survey.

“Crude markets drew from the positive tone in the market after upbeat German sentiment and comments made by Fed Chairman Bernanke, which confirmed a low interest rate environment favorable for risk assets,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today.

Military Risk

Odds compiled by that Israel or the U.S. will strike Iran by the end of 2012 fell to the lowest level in almost two weeks yesterday on speculation that sanctions aimed at halting the Islamic Republic’s nuclear program may work. The implied probability of action fell to 37 percent from 40 percent a week ago. The odds were as high as 62 percent last month.

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. Saudi Arabia is the leading producer.

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