Oil Rises on U.S. Economic Data, Decision on Sanctions

By Mark Shenk - Mar 31, 2012 1:45 AM GMT+0530



Oil climbed, capping a second quarterly gain, after reports showed U.S. consumer sentiment and spending rose and President Barack Obama cleared the way for new sanctions targeting Iran.

Futures increased 24 cents as an index of consumer sentiment rose in March and U.S. purchases gained the most since July. Crude reached its intraday peak when Obama determined that world oil supplies were sufficient to proceed with sanctions on banks in countries that import Iranian oil.

“The economic numbers today were mostly bullish,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “They point to pretty solid growth of both the economy and demand.”

Crude oil for May delivery settled at $103.02 a barrel on the New York Mercantile Exchange. Prices increased 4.2 percent for the quarter after a gain of 25 percent in the last quarter of 2011.

Brent oil for May settlement gained 49 cents, or 0.4 percent, to end the session at $122.88 a barrel on the London- based ICE Futures Europe exchange. The contract climbed 14 percent this quarter. The European benchmark contract’s premium to New York-traded West Texas Intermediate oil was at $19.86, the most at the close since Oct. 24.

The Thomson Reuters/University of Michigan consumer sentiment index rose to 76.2 from 75.3 at the end of last month. It was projected to come in at 74.5 after a preliminary figure of 74.3, according to the median of 63 estimates from economists in a Bloomberg News survey.

U.S. consumer purchases gained 0.8 percent in February, the Commerce Department said, exceeding the 0.6 percent median gain forecast in a Bloomberg News survey of economists.
Additional Sanctions

Obama’s decision cleared the way for the imposition of congressionally mandated sanctions, according to a memorandum released by the White House. The law allows banks that settle petroleum-related transactions through Iran’s central bank to be cut off from the U.S. banking system.

Obama and world leaders including French President Nicolas Sarkozy are trying to use sanctions to keep Iran from developing nuclear weapons. Obama and Sarkozy are seeking re-election this year.

“This is a continuation of what we’ve been doing for a while,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion. “Obama and Sarkozy have the same problem. They want to hurt Iranian exports while preventing a spike in prices that hurts the global economy and their re-election campaigns.”

Oil in New York reached $110.55 on March 1, the highest level since May 4, amid speculation that Western sanctions would disrupt shipments from the Middle East.
‘Alarming’ Rhetoric

The Persian Gulf nation is breaching United Nations resolutions and increasing the size of its nuclear program amid an “alarming” escalation in global rhetoric toward its atomic plans, Russia’s Deputy Foreign Minister Sergei Ryabkov said yesterday in an interview in New Delhi.

Iranian (OPCRIRAN) crude output fell 65,000 barrels a day to 3.385 million this month, the lowest level since June 2002, according to a Bloomberg News survey of oil companies, producers and analysts. The Islamic republic is the second-biggest oil producing country in OPEC after Saudi Arabia.

Oil also rose as European officials agreed to increase a rescue lending fund to 800 billion euros ($1.07 trillion), according to a statement after a meeting in Copenhagen today. Efforts to raise it will succeed in tempering the debt crisis, German Finance Minister Wolfgang Schaeuble said yesterday.
Equities Gain

The Standard & Poor’s 500 Index rose 0.4 percent. The dollar was down 0.3 percent against the euro. A weaker dollar and stronger common currency boost the appeal of commodities as an investment alternative.

“The oil price rise today coincided with the dollar’s move lower,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “The U.S. economic data this morning gave the market a bit of a boost.”

Crude prices fell 2.5 percent yesterday, the biggest drop since December, and decreased 3.6 percent this week after U.S. stockpiles climbed to the highest level since August and Western countries discussed tapping emergency reserves.

“There appears to be a concerted effort to drive down the price of oil,” O’Grady said. “We will have to wait and see whether it will have the desired impact.”

Oil output in March by the Organization of Petroleum Exporting Countries rose to a three-year high, led by a Libyan production gain, the Bloomberg News figures show. Production increased by 110,000 barrels, or 0.4 percent, to 31.22 million barrels a day from a revised 31.11 million in February.

Electronic trading volume on the Nymex was 405,840 contracts as of 3:27 p.m. in New York. Volume totaled 578,776 contracts yesterday, 10 percent below the three-month average. Open interest was 1.56 million.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net


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Showing 5 comments on Oil Rises on U.S. Economic Data, Decision on Sanctions

michael stevenson 16 minutes ago

Not done yet, we must understand that inflated energy prices have pushed energy company stocks higher thereby supporting the DOW. Housing was the last bubble supporting the markets, in a last ditch effort energy was the only tool left in the tool box to keep inflation in the global economic system as deflation has been the greatest risk to the global economy. I understand Iran ids a serious issue with radicals operation the government of Iran, that said it is convenient to cut Iran out of the energy business as to allow emerging energy markets in the US to take in part market share from Iran. Could be that the grand plan is to eliminate the competition such as Iran and Syria to name two problem countries in the middle east and reduce the market share of Iran and Syria permanently. The reasoning is that we have to stop Iran from gaining a nuclear weapon, sounds like a plan to me .However it is interesting that France and the USA would draw the line in the sand at this point in time when the global economy is in a fragile state? Could be that France and the USA are also manipulating the energy market given the fact that the new bubble supporting the current monopoly game is energy and perhaps without the energy play the global economy would already be in a massive depression leading to global unrest and the super wealthy elite to the poor house?

Just a thought.

Bird Dog Out
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michael stevenson 43 minutes ago

Again the geopolitical hype is used by the traders to push oil futures higher. The rise in oil prices began after Katrina which did affect oil production in the USA, after Katrina the traders bet crude prices higher on the next hurricane that just formed off of Africa.Oops then the hurricanes never returned to destroy the gulf oil platforms. Oh but hold on a minute Nigeria came into play and then Iraq and then Iran and then geeze you know what ? The global economy has never been affected by a disruption in the strategic oil supplies it relies on, the global economy has only been damaged by the traders crying the sky is falling the sky is falling therefor we must all pay more for energy! It is the traders that cause the real damage while lining pockets with billions in illegal profits or should be. Last time I checked on things falling from the sky is softball sized hail and tornadoes sucking up the mid west? Interesting that we never receive much feed back on real time events affecting Americans today. Hey what about all that gasoline and diesel the refiners are exporting to South America and the EU.Interesting that we have builds in crude oil and massive declines in refined petroleum products every other week.With WTI cost point lower than Brent Crude it is said America is the China of exporting refined petroleum products and all this while we pay more at the pump? No doubt demand destruction is biting the US market place and consumers amazingly enough seem to be spending more, yes on inflated prices due to higher energy and the consumers are again receiving less for every dollar spent. Then we have the consumers that have started putting less in the tank and more into consumer goods for pleasure. Has anyone noticed an increase in plastic gas can sales and more stranded motorists with a plastic gas can in hand either walking away from the vehicle or standing along side poring a precious five gallons that cost 22.50 to fill. Lets multiply that by 2 / 10 gallons cost 45.00 dollars multiply by 2 again 20 gallons = 90.00 x 2 for 40 gallons - 180.00 US dollars ? And imagine the refiners are exporting our fuel products at a profit to make up for the loss in the US market due to the fact the American consumer live in poverty just so they can go to work and be happy that they have jobs again even though everyone is still living a third world life style, and lets add one more slap in the face, our federal government has mandated that we have to pay for health insurance or else you get a ticket in the mail. Americans already cannot afford to pay for gas, how are they supposed to pay for health insurance? I have an idea, lets have the energy companies pay for our health care and subsidize our energy costs and buy us all Chevy Volts too! How long have we subsidized the oil companies? In Alaska the residents receive annual dividend checks. So why are the rest of us not receiving our dividend checks, its our oil and gas that the oil companies pump from the ground and to hell with the so called mineral rights that was just another con job against the citizens of America. The US government collects all the dividends from the oil companies that should be ours, perhaps the US government should pay for a national health care plan in conjunction with the big oil companies?

Really the whole event is comical!

Bird Dog Out
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eobserver 18 hours ago

If these sanctions are intended against the free world driving public they are achieving their goals. How much has the price at the pump increase due to the impending sanctions, which will only go into effect in July? We have three more months or may be even more to fully feel the sanctions in our own pockets.
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Thomas Rajan in reply to eobserver 10 hours ago

The July sanctions have already been priced in - remember that we're talking about May oil here already. It's only new sanctions that will drive up the price more. Hopefully some progress will be made at the meeting scheduled in mid-April with Iran. At least they're talking... But angry rhetoric coming out of that would not be good.
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jrt63oil 1 day ago

HOW DO YOU PRICE OIL FOR MAY WHEN WE ARE STILL IN MARCH.THANKS WASHINGTON,WALL STREET,AND PRESIDENT OBAMA PLEASE HELP OUR OIL PRICES,
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