Oil Rises From Nine-Month Low on Supply, Europe Measures

Oil rebounded from the lowest close in almost nine months in New York on speculation that European measures aimed at fighting the region’s debt crisis will spur demand for fuel.

Crude posted its steepest intraday gain in eight months, increasing as much as 4.5 percent and trimming the biggest quarterly decline since the final three months of 2008. Oil gained after euro-area leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy. Prices may advance after the European Union’s ban on the purchase, transport, financing and insurance of Iranian crude starts on July 1, a Bloomberg survey showed. Norway’s first industrywide energy strike since 2004 is in its sixth day.

“Eased liquidity is good for the oil price and that is the key influence right now,” Torbjoern Kjus, an oil analyst at DnB ASA, said by phone from Oslo. Tightening sanctions on Iran are a “wildcard,” he said.

Oil for August delivery increased as much as $3.50 to $81.19 a barrel in electronic trading on the New York Mercantile Exchange and was at $81.02 at 1:41 p.m. London time. The contract yesterday plunged $2.52, or 3.1 percent, to $77.69, the lowest close since Oct. 4. Prices are down 18 percent this year and have dropped 21 percent this quarter.

Brent oil for August settlement rose $3.45, or 3.8 percent, to $94.81 a barrel on the London-based ICE Futures Europe exchange. Prices are down 23 percent since March 31, also the biggest decline since the final quarter of 2008. The European benchmark’s premium to West Texas Intermediate was at $13.79, compared with $13.67 yesterday.

EU Bank Financing

Oil extended gains after EU President Herman Van Rompuy said European leaders at a summit in Brussels agreed to drop the condition that emergency loans to Spanish banks give their governments preferred creditor status. Banks can also be recapitalized directly with funds rather than going through governments and leaders discussed ways to reduce the risk premiums on Italian and Spanish bonds, he said.

Sixteen of 42 analysts, or 38 percent surveyed by Bloomberg News, forecast New York crude will increase through July 6. Fourteen predicted that futures will decline and 12 said there will be little change in prices.

Oil may rebound to as high as $90 a barrel if prices hold above a support level near $75, according to technical analysis by Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago.

Iran’s daily exports will fall by 1 million barrels in the second half of this year because of sanctions, the International Energy Agency estimates. The U.S. and Europe suspect the Persian Gulf country’s nuclear program involves weapons development. The Tehran government says it is enriching uranium for civilian and medical purposes.

China Exemption

Exports from Iran will “gradually” fall amid maintenance on fields and reservoirs starting next week, Deputy Oil Minister Ahmad Ghalebani said June 26 at an energy conference in Moscow. Shipments may decline by 20 percent to 30 percent, said Ghalebani, who is also head of National Iranian Oil Co.

Iran’s output was 3.23 million barrels a day in May, the lowest level since June 1992, according to data compiled by Bloomberg. Saudi Arabia is the biggest shipper of crude in the Organization of Petroleum Exporting Countries.

Under a U.S. law enacted Dec. 31, financial institutions may be cut off from the country’s financial system if they settle oil trades with Iran’s central bank.

“We’re about to begin the Iranian oil embargo so we’ll start to get a look over time about what the impacts of that are going to be,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “It’s going to take supply off the market, but the question is to what extent that draws down inventories and affects excess capacity.”

Norway Strike

Norway’s strike shut production of about 15 percent of the crude supply from western Europe’s largest exporter. The country’s oil and gas unions will maintain their strike at the existing level, Leif Sande, president of Industry Energy, the biggest of the unions, said from Stavanger after a meeting of the three unions involved.

The meeting was aimed at deciding whether to expand the strike action that is currently halting about 250,000 barrels of oil a day, as well as some gas output.

Gasoline for July delivery rose 0.8 percent to $2.6342 a gallon on the New York Mercantile Exchange. Prices have fallen 22 percent this quarter.

Regular gasoline at the pump, averaged nationwide, slid 0.4 cents to $3.369 a gallon on June 27, according to Heathrow, Florida-based AAA, the largest U.S. motoring group. Prices have dropped 14 percent this quarter.