Crude Oil Rises Amid Middle East Tension, Heads for Weekly Gain

Author: Spencer Ogden
Date posted02/Dec/2011
Author: Spencer Ogden

Oil rose, heading for its first weekly gain in three, as investors bet U.S. employers quickened the pace of hiring last month and concern deepened that tension between Iran and the west will disrupt Middle East exports.

Futures gained as much as 0.9 percent and are up 4 percent this week. European governments tightened sanctions on Iran, the second-biggest oil producer in the Organization of Petroleum Exporting Countries, in a clampdown over the Persian Gulf nation’s nuclear program. The U.K. yesterday ordered Iran to close its embassy in London after protestors stormed the British legation in Tehran.

“The oil market is strongly supported by the geopolitical risks over Iran, and a physical market that’s already very tight,” said James Zhang, a strategist at Standard Bank Plc in London, who forecasts prices will remain at current levels for the rest of the year. “Oil will be range-bound without a crisis in Iran or blow-up in the euro-zone.”

Crude for January delivery climbed as much as 89 cents to $101.09 a barrel in electronic trading on the New York Mercantile Exchange and was $100.63 at 9:40 a.m. London time.

Brent oil for January settlement was at $109.89 a barrel, up 90 cents, on the London-based ICE Futures Europe exchange. The contract slid $1.53, or 1.4 percent, to $108.99 yesterday.

The European contract’s premium to West Texas Intermediate crude traded in New York declined 13 cents to $8.92 a barrel. The spread surged to a record $27.88 on Oct. 14.

Jobless Rate

Oil also rose before a U.S. Labor Department report today that may show 125,000 workers were added last month after an 80,000 increase in October, according to the median estimate in a Bloomberg News survey of economists. The jobless rate probably held at 9 percent, the survey showed. The Labor Department’s report is due at 8:30 a.m. in Washington.

Futures may fall next week as unemployment stays near that level, a separate Bloomberg News survey showed. Eleven of 24 analysts, or 46 percent, forecast oil will fall through Dec. 9. Nine, or 38 percent, predicted a gain, and four said there will be little change. Last week, 57 percent of those surveyed projected a drop.

“We have a dangerous possibility of a war, at the worst, so we always have to put some premium in this market,” said Ken Hasegawa, a commodity sales manager at broker Newedge Group inTokyo, who sees New York oil futures trading between $98.50 and $101.50. “Even though the economic situation is worse than at the beginning of the year, the oil price will be staying at this high level.”