HomeNewsOil jumps 2% on Iran jitters, Opec meeting eyed

Oil jumps 2% on Iran jitters, Opec meeting eyed


NEW YORK — Oil prices rose 2% on Tuesday as geopolitical jitters about Iran combined with threats to supply and key shipping lanes sent United States crude above $100 a barrel.

Crude futures briefly surged nearly $4 a barrel after markets opened in New York in a furious burst of trading that traders attributed to renewed fears over Iran, expectations of further monetary easing and computer-driven dealing.

Brent and US crude prices shot up at 9:45am, adding to previous gains, as volumes surged in one of the most concentrated bursts of trading activity in months.

Other commodity markets did not jump and traders remained unable to pinpoint a specific trigger for the price surge.

Oil prices and US petrol futures especially, also received a boost from news of a collision shutting the Houston Ship Channel.

Any talk of a big policy change from the US Federal Reserve was squelched after the Fed ended a one-day meeting holding policy steady, causing oil initially to pare gains and turning equities on Wall Street lower.

“I don’t know why markets are reacting negatively since there was no indication of QE3 (quantitative easing) ahead of the meeting, despite rumours running around today,” said Dominick Chirichella, senior partner at Energy Management Institute in New York.

“I think oil is focused more on Iran and this possibility of a blockage of the Strait of Hormuz,” Chirichella added.

Brent January crude rose $2,24 to settle at $109,50 a barrel, after reaching $111,10 intraday. Brent’s 2,09% gain was the biggest one-day percentage rise since November 28.

US crude rose $2,37 to settle at $100,14 a barrel, after reaching $101,25. The 2,42% jump was the biggest since November 16.

Trading volume eased after the early surge, but US crude turnover was 24% above the 30-day average and Brent volume was 1% below the 30-day average, according to Reuters data.

Several traders pinned oil’s early surge on rising tensions in Opec member Iran a day after a news redistribution service appeared to have drawn market attention to comments made on Monday by a member of the Iranian parliament who said the military was set to practice shutting the Strait of Hormuz, the world’s most important oil shipping route.

Market participants also cited talk the US Fed could be mulling a third round of quantitative easing.

The Fed in its statement pointed to Europe’s turmoil as a big risk to the US economy and left the door open to a further easing of monetary policy even as the central bank noted some improvement in the US labour market.

Adding to supply concerns and lifting US gasoline futures, the Houston Ship Channel, an important oil transport waterway to the region’s refining network, shut following a collision between a tanker and a cargo vessel.

During post-settlement trading, news of bombs hitting an Iraqi crude pipeline transporting crude from southern oilfields to storage tanks around the Basra oil hub added another supportive factor for oil prices.

Ahead of the early price spike, oil prices received a boost when investors took some encouragement from lower yields at an auction of Spanish short-term debt and a survey showing German investor sentiment rose unexpectedly in December.
Investors also eyed comments by Opec ministers gathering in Vienna ahead of yesterday’s policy meeting.

The group’s oil price hawks looked set to accept a new production target that legitimises the big increase in supply over the last six months out of rival producers Saudi Arabia and the its Gulf allies.

The deal is designed to help restore Opec’s credibility after talks fell apart in June and left it without its normal self-imposed output constraints.

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