Geopolitical Worries Boost Crude

Oil futures jumped nearly 3.6 percent Tuesday, driven by worries that geopolitical tensions could impede global supplies, as well as encouraging U.S. economic data that boosted the stock market as well.

Light, sweet crude for January delivery ended the day up $3.34, at $97.22 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled up $3.09, or 3 percent, to $106.73 a barrel. The January Nymex contract expired at the end of trading Tuesday; the February contract, which becomes the front-month contract Wednesday, settled up $3.19 to $97.24.

Volume was light in both contracts, at about half the average because of the holiday week.

Iranian news dominated the oil market. Leaders of 11 nations including the U.S. and Saudi Arabia were scheduled to meet Tuesday to discuss sanctions of Iranian oil exports. Iran is the world's third-largest oil exporter, supplying 2.2 million barrels per day to the world. Though the U.S. does not buy crude from Iran, the fear is that an already-tight global supply portfolio would be further pinched. The U.S. and other western countries are targeting Iran's oil and financial sectors in response to Iran's nuclear ambitions. Meanwhile, the Pentagon sought to downplay comments by U.S. Defense Secretary Leon Panetta saying Iran could have a nuclear weapon in a year or less. Separately, Iran invited UN weapons inspectors into the country.

Concerns were also rising over an apparent breakdown in Iraq's central government, just as the oil industry there is beginning to show signs of progress in its recovery from the war. And in Kazakhstan, the government declared a state of emergency in the Caspian oil town of Zhanaozen after clashes between laid-off oil workers and security forces during an anti-government protest, and at least 11 people were reported killed. Kazakhstan exported 1.5 million barrels of oil a day in 2010.

"There is an undercurrent in crude oil with the issues happening in the Middle East, and the massacre in Kazakhstan," said Bill O'Grady, chief market strategist for Confluence Investment Management in St. Louis. "It's just further evidence that you've got unrest in energy-producing areas...It's just like, 'Oh my God, another energy producer. What's next, are we going to start having riots in Texas?"

Oil was also boosted by a report from the Commerce Department saying housing starts increased to the highest level in 19 months. Stocks soared as well, with the Dow Jones Industrial Average up 325 points in mid-afternoon.

Front-month January reformulated gasoline blendstock, or RBOB, rose 8.96 cents, or 3.6 percent, to $2.5787 a gallon. January heating oil was up 6.9 cents, or 2.5 percent, to $2.8494 a gallon.

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


Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.


Our Privacy Pledge

Most Popular Articles

From the Career Center
Jobs that may interest you
Technical Sales- Decontamination/Chemical Cleaning Services
Expertise: Sales
Location: Baton Rouge, LA
Account Manager - Western US - Vapor Control & Degassing
Expertise: Sales
Location: Long Beach, CA
Sales Manager - Vapor Control/Degassing Services
Expertise: Sales
Location: Houston, TX
search for more jobs

Brent Crude Oil : $51.78/BBL 0.77%
Light Crude Oil : $50.85/BBL 0.83%
Natural Gas : $2.99/MMBtu 4.77%
Updated in last 24 hours