Crude Oil Trades Near Two-Week High Amid Supply Risks, Euro Debt Optimism

Dec 1, 2011 -- Oil traded near its highest in almost two weeks as the clash between Iran and Western governments heightened speculation that Middle East supplies may be at risk.

Futures were little changed after advancing as much as 0.6 percent after the U.K. closed its embassy in Iran, the second- biggest oil producer in the Organization of Petroleum Exporting Countries, following an attack by protesters. Prices reached their highest level in almost two weeks yesterday after the U.S. Federal Reserve and five other central banks cut dollar- borrowing costs for emergency funding by European banks.

"Any shortfall of Iranian production on the world market would bring a massive deterioration to the world balance,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse.” Prices could surge to $150 in the event of conflict in the Persian Gulf, he said.

Crude for January delivery on the New York Mercantile Exchange was at $100.43 a barrel, up 7 cents, at 12:53 p.m. London time. The contract rose to $101.75 a barrel yesterday, the highest since Nov. 17, and posted a 7.7 percent increase for November following an 18 percent gain in October.

Brent oil for January settlement fell 0.6 percent to $109.84 a barrel on London’s ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate narrowed to $9.41 from $10.16 yesterday.

Iran Sanctions

The U.K. ordered Iran to close its embassy in London and remove its diplomats in the aftermath of a mob attack on the British Embassy in Tehran. France and Germany recalled their ambassadors for consultations and Italy considered closing its mission in the Iranian capital.

The European Union is looking at extending sanctions on Iran, possibly halting crude purchases, Sweden’s Foreign Minister Carl Bildt said today in Brussels.

The U.K., Germany and France import little crude from Iran compared with Greece, Italy and Spain, according to Petromatrix GmbH. Countries in southern Europe may seek a pledge from Saudi Arabia for increased supplies of its crude before agreeing to a ban on oil imports from Iran, the Zug, Switzerland-based researcher said today.

"In the case of southern European countries joining in a ban on Iran oil it is really the decision of Saudi Arabia,” Petromatrix Managing Director Olivier Jakob said in a note.

The U.S. Energy Department said yesterday that oil stockpiles rose 3.9 million barrels last week, compared with a forecast increase of 50,000 barrels in a Bloomberg survey.

Distillate-fuel inventories, including diesel and heating oil, rose 5.53 million barrels to 138.5 million last week, an Energy Department report showed. They were estimated to decline 1.25 million barrels, according to the median of 12 analyst estimates in the Bloomberg News survey.

Gasoline supplies increased by 213,000 barrels. They were forecast to add 1.45 million barrels, according to the survey. Crude stockpiles at Cushing, Oklahoma, the delivery point for New York futures, dropped 715,000 barrels to 31.3 million.