Bloomberg: Crude oil rose in New York, poised for its biggest annual increase since 1999, as Iran announced plans to start its first nuclear reactor next year, raising concern that the move will heighten a confrontation with the U.S. By Christian Schmollinger
Dec. 31 (Bloomberg) — Crude oil rose in New York, poised for its biggest annual increase since 1999, as Iran announced plans to start its first nuclear reactor next year, raising concern that the move will heighten a confrontation with the U.S.
Iran, holder of the world second-biggest oil reserves, will begin generating atomic power in mid-2008, the republic’s state news agency said yesterday, citing Foreign Minister Manouchehr Mottaki. The U.S. alleges the nuclear energy program is being used to enrich uranium produce weapons.
“We’re going to have to live with the current geopolitical situation for at least the next 12 months,” said Gavin Wendt, senior resources analyst at Fat Prophets in Sydney. “The overall pattern for oil is still overhelmingly upward.”
Crude oil for February delivery climbed as much as 45 cents, or 0.5 percent, to $96.45 a barrel in electronic trading on the New York Mercantile Exchange. It was at $96.16 at 3:25 p.m. Singapore time.
BHP Billiton Ltd., Woodside Petroleum Ltd. and Santos Ltd. halted more than half of Australia’s oil production as the first tropical cyclone of the season struck the northwest coast.
Oil has jumped 58 percent this year on demand from China and India, and concern that tensions with Iran and violence in Iraq and Nigeria may disrupt supply. New York futures reached a record $99.29 on Nov. 21 as a weaker dollar made crude cheaper in other currencies. In 1999, oil more than doubled to $25.60 a barrel.
Prices may surge to $100 early next year, Andy Lipow, president of Houston-based Lipow Oil Associates LLC, said Dec. 28.
“We will get to $100 because world oil demand is still quite good,” he said.
Simmering Dispute
New York crude prices have gained 41 percent in euros this year, 48 percent in yen and 54 percent in British pounds.
Brent crude for February settlement rose as much as 41 cents, or 0.4 percent, to $94.29 a barrel in electronic trading on the ICE Futures Europe exchange. It was at $94.15 at 2:21 p.m. Singapore time.
Iran, the Organization of Petroleum Exporting Countries’ second-largest producer, wants to develop atomic energy to generate electricity, President Mahmoud Ahmadinejad has said.
The dispute with the U.S. has sent crude prices higher as a military conflict would threaten almost a quarter of global oil supply that passes from the Persian Gulf through the Strait of Hormuz waterway off Iran’s coast.
“Any escalation in those tensions could push prices higher,” said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. “The nature of the oil market is that there is the potential for geopolitical tensions to impact on prices.”
Net-Longs, Average
Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended Dec. 25, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 52,847 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Dec. 28 Commitments of Traders report. Net-long positions increased by 17,864 contracts, or 51 percent, from a week earlier.
Crude oil in New York has averaged $72.37 a barrel this year, 9.2 percent higher than in 2006. Prices in 2008 may average $74.50, according to a Bloomberg News survey of 27 analysts.
The International Energy Agency, an adviser to 26 oil- consuming nations, on Nov. 13 cut its forecast for global demand for 2008 by 300,000 barrels a day on expectation that prices near $100 may slow consumption in the U.S., Europe and Japan. It was the third reduction since August.
China, India
Lower oil demand in developed countries may be offset by gain in China and India, the world’s most populous nations and its fastest-growing major economies.
India’s gross domestic product will climb by 8.7 percent in the fiscal year ending March 31, according to the median forecast of 12 economists surveyed by Bloomberg. China’s economy will expand 11 percent in 2008, the Asian Development Bank estimates.
Oil markets “are dancing on thin ice” because of the growing Chinese and India oil consumption, said Fatih Birol, the IEA’s chief economist on Nov. 21. The Agency said Nov. 7 that demand from the two countries will create a supply crunch as soon as 2015 and by 2030 will account for half of a projected 55 percent increase in global energy usage.
“There’s most likely going to be a period of slower growth in the U.S. and that demand-side of the equation may relieve some pressure on the oil price,” said Commonwealth Bank’s Moore, who forecasts oil at $85 a barrel in the first quarter of 2008.
“Although the international economy is likely to remain relatively solid and there will be demand for oil from China and other developing parts of the world.”
