Oil Rises on U.S. Consumer Confidence, Iran Inspections

Oil rose on reports showing that U.S. consumer confidence gained and the United Nations’ atomic agency found evidence Iran boosted its output of enriched uranium that could be used for a nuclear weapon.

Futures increased for a second day as the Thomson Reuters/University of Michigan final index of consumer sentiment advanced to 79.3, the most since 2007. Iran increased its supply of 20 percent-enriched uranium by a third, to 145 kilograms (320 pounds), since February, the International Atomic Energy Agency said today in a restricted 11-page report seen by Bloomberg.

“The consumer confidence numbers and Iranian headlines are giving us a lift,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. Investors also bid the price higher because “we’re heading into a long weekend,” he said.

Crude oil for July delivery rose 20 cents to settle at $90.86 a barrel on the New York Mercantile Exchange. Front-month futures declined 0.7 percent this week and are down 8.1 percent this year. Prices have declined 18 percent from a March 1 intraday peak of $110.55.

There will be no floor trading in New York on May 28 because of the Memorial Day holiday.

Brent oil for July settlement rose 28 cents, or 0.3 percent, to end the session at $106.83 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to New York-traded West Texas Intermediate crude was at $15.97, up from $15.89 yesterday.

The confidence measure was projected to hold at the preliminary reading of 77.8, according to the median forecast of 60 economists surveyed by Bloomberg.

Consumer Confidence

“Rising consumer sentiment is the main thing supporting the market,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

UN inspectors reported they’d found “the presence of particles” of 27 percent-enriched uranium at Iran’s Fordo facility. The particles were a result of “technical reasons beyond the operator’s control,” Iran told the Vienna-based agency, which is looking into the matter. Uranium enriched over 20 percent is technically highly enriched, though most nuclear bombs use the heavy metal purified to 90 percent levels.

“News stories like this underscore the reality that the nuclear issues with Iran remain unresolved,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “Iran is not likely to go easy and quietly to the negotiating table and offer full disclosure, transparency or compliance.”

Nuclear Negotiations

Iran, the second-biggest crude producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, and world powers decided yesterday that they will meet again next month after they were unable to reach a deal on the nation’s nuclear program. Negotiators from the U.S., the U.K., France, Germany, China and Russia plan to meet their Iranian counterparts June 18 and 19 in Moscow.

Prices also advanced as German Chancellor Angela Merkel left the door open to a compromise on debt sharing in the euro area and Italian Prime Minister Mario Monti said most European Union leaders at a summit this week backed the idea of issuing common debt, and Italy can help coax Germany to act for Europe’s “common good.”

Euro-Area Bonds

“Chatter about euro-area bonds is giving the market some support,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “After falling $16 in six weeks, it’s time to take a little break.”

Merkel’s veto on allowing Germany to underwrite joint debt issuance in the euro region is under fire. While she refused to back joint euro-area bonds at this week’s Brussels summit, Germany’s opposition parties wrung a concession from the chancellor on her return to Berlin yesterday to reconsider a separate proposal on common liability for sovereign debt.

Italy’s Monti said in an interview on Italian television station La7 yesterday that “Europe can have euro bonds soon.” Germany has an interest in ensuring no country leaves the euro, and Greece will probably remain in the currency union, he said.

“The unresolved nature of the Iranian nuclear program provides further upside risk to oil prices at a time when global growth and European sovereign debt concerns seem to be dominating the headlines,” Schenker said.

The euro fell against the dollar and yen for the fourth day amid concern Spain’s regional governments may lose access to capital markets. The shared currency traded at almost its lowest level since July 2010 after a Greek opinion poll showed an anti-bailout party gaining support before June 17 elections.

Junk Status

Bankia SA, Banco Popular Espanol SA and Bankinter SA had their credit ratings cut to junk by Standard & Poor’s, which cited Spain’s weakening economy.

“The fact that we are holding up signals that negative news from Europe has already been priced in,” Lynch said.

Electronic trading volume on the Nymex was 224,461 contracts as of 3:06 p.m. in New York. Volume totaled 392,146 contracts yesterday, the lowest level since April 27 and 32 percent below the three-month average. Open interest was 1.44 million, the least since Feb. 2.