Oil rose for the first time in four days on renewed concern that Middle East tension will disrupt supply and as equities advanced, raising economic optimism.
Crude gained 0.9 percent as the European Union moved up a meeting to discuss an oil embargo against Iran by a week to Jan. 23 and Iran announced another step in its nuclear program. U.S. and European stocks gained as French business confidence climbed and Alcoa Inc. reported better-than-forecast revenue.
“There is no way traders are going to short oil if there is potential for some fighting,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “People are feeling a little bit better about the economy.”
Crude for February delivery climbed 93 cents, or 0.9 percent, to settle at $102.24 a barrel on the New York Mercantile Exchange. West Texas Intermediate oil traded on the Nymex has surged 20 percent in the past three months.
Brent oil for February settlement increased 83 cents, or 0.7 percent, to $113.28 a barrel on the London-based ICE Futures Europe exchange.
“We’ve put in at least $10 a barrel, if not more, Iranian risk premium in the price of oil,” said Phil Flynn, an analyst with PFGBest in Chicago.
Uranium Enrichment
Iran began enriching uranium at a fortified nuclear site, the International Atomic Energy Agency said yesterday. The move drew condemnation from the U.S. and France and may accelerate the imposition of stricter sanctions.
The U.S. State Department said the enrichment represents an intensification of Iranian violations of United Nations agreements on its nuclear program. It called on Iran to suspend enrichment activities.
“Iran is still the main reason why WTI surpassed the $100 mark,” said Hannes Loacker, an analyst at Raiffeisen AG in Vienna. “If there’s no intensification, the risk premium will be priced out in the next couple of months.”
Iran conducted naval exercises near the Strait of Hormuz, the waterway through which almost 20 percent of the world’s oil flows, for 10 days ended early this month.
“Iran’s bellicose verbiage has succeeded in pushing up oil prices, without closing the Strait of Hormuz, or even firing a shot in anger,” Mike Fitzpatrick, editor of the Energy Overview newsletter in New York and previously an oil trader at MF Global, said in an e-mail.
President Barack Obama is prepared to use military force to prevent Iran from acquiring a nuclear weapon if sanctions and diplomacy fail, Dennis Ross, his former special assistant on Iran, said in an interview yesterday.
U.S. Military Force
Oil also followed gains in U.S. stocks as Alcoa, the largest U.S. aluminum producer, rallied as much as 4.5 percent. The Standard & Poor’s 500 Index increased 0.9 percent and the Dow Jones Industrial Average advanced 0.6 percent. The S&P’s GSCI Index of 24 raw materials gained 0.9 percent.
“I see people chasing prices and I see people chasing the direction of the S&P 500,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Alcoa had good earnings and corporate profitability is tied to stock market evaluations.”
In Europe, the Stoxx Europe 600 Index advanced 1.8 percent after the Bank of France’s Business Sentiment Indicator (FRBSI) for manufacturers advanced to 96 in December from 95 in November, when it fell to the lowest since September 2009.
The country’s industrial production climbed 1.1 percent in November, lifted by electronics and refinery output, the national statistics office Insee said today. Both numbers beat economists’ forecasts.
‘A Certain Optimism’
“There is a certain optimism about what’s going on in the U.S. economy and we are feeling a little bit better about Europe,” said Flynn.
German Chancellor Angela Merkel and International Monetary Fund Managing Director Christine Lagarde will meet in Berlin late today as pressure grows to complete a Greek debt swap needed to put a rescue plan in place.
The deal, hammered out by European Union leaders, Greek officials and the nation’s creditors on Oct. 26, called for bondholders to accept a 50 percent cut in the face value of their Greek debt, with a goal of reducing Greece’s borrowings to 120 percent of gross domestic product by 2020.
Oil volume in electronic trading on the Nymex was 560,730 contracts as of 3:07 p.m. in New York. Volume totaled 656,555 yesterday, 9.4 percent above the three-month average. Open interest was 1.39 million contracts.
