Crude Gains As Iran Worries Rise

Crude futures rose Tuesday, again flirting with $100 a barrel as Iranian students stormed the British embassy in Tehran, escalating worries about the oil-exporting nation.

The political action was the latest surrounding the still-simmering Middle East and helped to push prices up along with a better-than-expected jump in U.S. consumer confidence that has raised hopes for an improving domestic economy.

Light, sweet crude for January delivery settled $1.58, or 1.6%, higher at $99.79 a barrel on the New York Mercantile Exchange after rising as high as $100.15 earlier in the session.

It was the second-straight day that futures initially topped but failed to settle above the key level.

Brent crude on the ICE Futures exchange traded $2.23 higher at $110.91 a barrel.

With European Union officials due to meet Thursday to discuss an E.U.-wide ban on imports of Iranian oil, investors are getting prepared, should the move lead to supply shortfalls.

Iran exported 2.2 million barrels of oil a day last year, according to the U.S. Energy Information Administration. The E.U. as a whole was the second-biggest recipient of that oil.

"Iran is always such a wild card. From a psychological standpoint, trouble in the Middle East is important for oil prices," said Hamza Khan, an analyst at the Schork Group, an energy-trading adviser.

Still, he pointed to a better-than-expected consumer confidence report as a key driver in Tuesday's price action.

The Conference Board, a private research group, said its index of consumer confidence rose to 56 in November, up from a revised 40.9 in October and the highest level since July.

The figure, combined with strong retail sales on Black Friday, has improved sentiment about the U.S. economy, and with it, prospects for improved raw material demand.

Still, analysts said new worries about the spread of Europe's debt crisis held back a push through $100.

Italy had to pay investors yields above 7% at its government bond auctions on Tuesday, which puts the borrowing costs of the euro zone's third-largest economy at levels that have forced Portugal, Greece and Ireland to seek external bailouts.

Investors are concerned that Europe's debt crisis will hold down global growth or even push large economies back into recession, sending investors fleeing from riskier assets like oil and equities.

The Standard & Poor's 500 was recently up 0.6% to 1199.5 after breaking above 1200 earlier.

"If the euro starts to splinter, the dollar is going to roar higher, the S&P is going to collapse, ... and either of those things have been poisonous to energy prices," said Walter Zimmermann, chief technical analyst at brokerage United-ICAP.

Front-month December reformulated gasoline blendstock, or RBOB, settled 2.1 cents, or 0.8%, higher at $2.5391 a gallon. December heating oil settled 5.12 cents higher at $3.0211 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.


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