Crude Tops $101/Bbl On Range of Bullish Factors

Oil futures closed above $100 a barrel for the first time in two weeks Tuesday, driven higher by Iranian saber-rattling, improving U.S. consumer confidence and thin holiday trading volume.

Light, sweet crude for February delivery ended the day up $1.66, or 1.7%, at $101.34 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled up $1.31, or 1.2%, at $109.27 a barrel. Volume was about one-fourth normal level, with fewer than 178,000 contracts traded. The thin volume contributed to price volatility, with buy orders leading to jumps in prices.

Oil futures touched $100 a barrel in intraday trading in the prior two sessions but haven't closed above $100 a barrel since Dec. 13. Futures have now gained nearly $8 a barrel, or 8.3%, in the last week, rising for the last six sessions in a row.

Traders and analysts said a key factor driving the market was the latest news out of Iran, in which Iranian Vice President Mohammad Reza Rahimi was quoted by the official state news agency saying Iran would close the Strait of Hormuz if Western nations sanction Iran's oil exports. The Strait of Hormuz is the world's most important crude shipping channel, handling a third of the world's ocean-borne oil. Iran has recently begun conducting military exercises near the Strait.

The remark was the latest escalation of tensions between Iran and the West, which have been simmering since early November after the International Atomic Energy Agency publicly accused Iran of harboring nuclear weapon ambitions. Since then, a group of Western nations including the U.S., France and the U.K. have announced sanctions against Iran's financial and oil sectors.

"Certainly the market's nervous, these comments coming out of Iran have traders' attention, and in a very thin market it's exacerbated the move up," said Peter Donovan, an oil trader and vice president at Vantage Trading. "The Strait of Hormuz is a critical juncture in oil transportation. Even the threat it could be closed is incredibly disruptive."

Meanwhile, the Conference Board said its consumer confidence index jumped to 64.5 in December from a revised 55.2 in November, its highest level since April. The consensus estimate of economists surveyed by Dow Jones Newswires was 59.0 for December. The news gave a boost to oil prices earlier in the day, as increased economic activity is seen as bullish for oil prices.

"Macroeconomics are looking good, with data from the world's biggest energy consumer continuing to impress," said Phil Flynn, a senior market analyst with PFG Best. "It's a perfect day for prices to go up, there's not a lot of opposition because not a lot of people trading."

Front-month January reformulated gasoline blendstock, or RBOB, settled up 0.16 cent, or 0.1%, at $2.6888 a gallon. January heating oil rose 1.78 cents, or 0.6%, to $2.9085 a gallon.  

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


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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.
bernie v | Dec. 27, 2011
This is the same old story year after year, we allow one OPEC nation rattle a sword to effect the price of oil. Year after year the constant manipulation of oil prices has played havoc with the public, the lies, the speculation by wall street traders and others have continually done this. When the riots start as history this year has shown and the people all over t he word have had enough with games and other b/s going on will be stopped. The price of oil has already been a major factor in economys all over the world being effected adversely. I personally have had enough of it. There is no way oil should be more than 50-60 a barrel and Donald Trump is correct in his statements about OPEC and the oil industry being corrupt maybe one day America and other nations will wake up to the fraud being forced on all peoples of this planet...


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Brent Crude Oil : $56.86/BBL 0.76%
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