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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BRICS Bourses Start Futures Venture Aimed at Wealthy Individuals

By Michael Patterson and Nandini Sukumar - Mar 29, 2012

Exchanges in the biggest emerging economies will begin trading futures based on each other’s benchmark stock indexes today as rising wealth spurs demand for new investment products.

The five members of the BRICS Exchanges Alliance will cross-list futures on Brazil’s Bovespa Index (IBOV), Russia’s Micex Index (INDEXCF), the BSE India Sensitive Index, Hong Kong’s Hang Seng Index, the Hang Seng China Enterprises Index (HSCEI) and South Africa’s JSE Top40 Index. Traders engaged in arbitrage will be able to buy and sell futures based on the same index on multiple venues, boosting liquidity, according to Mumbai-based BSE Ltd.

The products may appeal to the growing number of wealthy individual investors in developing nations who want to access foreign markets, said Bruce Weber, dean of the Lerner College of Business and Economics at the University of Delaware in Newark. Per-capita gross domestic product in emerging markets has jumped 104 percent during the past decade to about $6,980, according to the Washington-based International Monetary Fund.

“The exchanges are doing well in local markets and want to be seen as international for their local investors, who can then go to another BRIC country easily,” Weber, who co-wrote “The Equity Trader Course” in 2006, said in a phone interview. “BRIC countries have generated a lot of growth for investors.”

The grouping joins Brazil, Russia, India and China -- nations identified by the acronym BRIC in 2001 by Goldman Sachs Group Inc.’s Jim O’Neill, representing countries the New York- based bank predicted two years later would join the U.S. and Japan as the world’s biggest economies by 2050 -- with South Africa. The BRIC nations held their first summit in 2009 and invited South Africa to join the group in December 2010.
Tripling Assets

Financial assets in developing countries may triple to $141 trillion, or 36 percent of the global total, by 2020 from 21 percent in 2010, according to a December report by the McKinsey Global Institute. Investors in Brazil, Russia, India, China and South Africa have an average 16 percent of their assets in equities, compared with 42 percent in the U.S. and 29 percent in western Europe, McKinsey said.

Emerging-market investors have grown richer as their economies expanded at a mean annual rate of 6.3 percent during the past decade. Growth will probably average 6.5 percent in the next five years, compared with 2.5 percent in developed countries, according to September estimates by the Washington- based International Monetary Fund.

“From a portfolio diversification point of view, it’s certainly a nice strategy,” Bluford Putnam, chief economist at CME Group Inc., which operates the world’s largest futures exchange and owns a stake in Sao Paulo-based BM&FBovespa (BVMF3) SA, said in a March 29 interview in London. “Growth rates in Europe and the U.S. are going to be lower.”
Volatility Concern

The Bovespa (IBOA) has climbed 13 percent this year, while the Micex (MIDA) gained 6.7 percent and the Sensex (JNSA) increased 10 percent. The Hang Seng China Index (BHSA) rose 6 percent and South Africa’s Top40 index advanced 3.9 percent. The MSCI All-Country World Index (MXWD) of shares in developed and emerging countries climbed 10 percent.

New futures products may encourage investors to focus on shorter-term returns and lead to increased volatility in stock markets, said Allan Conway, who oversees about $24 billion as the head of emerging market equities at Schroders Plc in London.

“That could actually be counterproductive,” Conway said in a March 29 phone interview.

Initial trading in the contracts may be “quite light,” Charles Li, the chief executive officer of Hong Kong Exchanges & Clearing Ltd., told reporters at a conference in Boca Raton, Florida on March 13. All the exchanges, except for the Russian bourse, won’t charge users to trade the index products being cross-listed for the first six months, Li said.
‘Combined Index’

Half the revenue from trading futures based on another exchange’s index will be shared with that market operator, Li said. The Hong Kong exchange, for instance, will give half the revenue it eventually produces from trading futures on India’s Sensex Index to BSE Ltd.

Russia’s Micex has delayed listing the index futures until May.

The project’s next phase will include the development of an index representing the member countries, Marta Alves, a senior adviser to BM&FBovespa, said at the March 13 conference. Products such as exchange-traded funds based on that gauge will probably generate more liquidity and interest from investors, she said.

“It shows a good level of partnership and collaboration,” said Weber. “They could move forward with a combined index.”

To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED

India Said to Plan Using Foreign Currency for Iran Oil Deals

By Pratish Narayanan and Anto Antony - Mar 27, 2012

India may continue paying for Iranian (OPCRIRAN) oil in foreign currencies until European Union sanctions take effect in July, when buyers will start using rupees, according to two people with knowledge of the matter.

India will waive taxes on crude bought with rupees, it said in its March 16 budget. That raised speculation refiners will start settling its oil bill with Iran in local currency to avoid international sanctions. While India could start paying for about 45 percent of the oil in rupees from next month, the countries prefer to settle trades in foreign tender such as euros, the people said, declining to be identified because the information is confidential.

R.C. Joshi, a spokesman for India’s oil ministry in New Delhi, didn’t return two calls made to his mobile phone seeking comment. Mohsen Qamsari, head of international affairs at the National Iranian Oil Co., was not available to comment when called at his office in Tehran.

India, Iran’s second-biggest oil customer, is trying to maintain bilateral trade in the face of escalating economic and financial measures against the Islamic Republic over its nuclear program, which the U.S. and its allies say is a cover to make atomic weapons. Iran says the program is for civilian purposes.

The South Asian nation, which relies on imports for almost 80 percent of its oil requirements, has faced difficulties finding banks willing to transfer payments to Iran since the Reserve Bank of India in December 2010 dismantled a mechanism to settle trade in euros and dollars.
Foreign Cash Preferred

Increased pressure from the U.S. could lead Indian refiners to start rupee payments earlier than planned, before the EU sanctions take effect, the people said.

India’s rupee payments to Iran may total at least $4 billion a year, and will be deposited in India’s state-run UCO Bank (UCO), which doesn’t have U.S. operations and is unlikely to be affected by the global sanctions, one of the people said. Payments in foreign currencies are preferred because the rupee isn’t easily traded abroad.

The Indian rupee has dropped 11 percent over the past 12 months, making it the worst performer among Asia’s most-traded currencies, according to data compiled by Bloomberg. It has fallen 3.2 percent this month, the data show.

While India proposed paying for oil in rupees, Iranian officials have sought partial payment in yen because they’re concerned that they may not get sufficient value from the currency, three people with knowledge of the talks said Jan. 23.
Turkish Bank Payments

Transactions are now routed through Ankara-based Turkiye Halk Bankasi AS (HALKB), which has told Indian refiners it may no longer be able to act as an intermediary when European sanctions take effect, four people with knowledge of the matter said Jan. 10.

U.S. President Barack Obama’s administration wants China, India and 10 other nations to present plans detailing how they will curtail Iranian oil imports, saying past cuts aren’t enough to win them an exclusion from new U.S. sanctions.

While India hasn’t asked its refiners to stop purchasing Iranian crude, the government has told processors in the South Asian nation to seek alternative supplies and gradually reduce dependence on the Persian Gulf state because of increasing pressure from the U.S., three Indian officials with direct knowledge of the situation said March 23.

To contact the reporters on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.