Oil rises to three-day high as Iran tension counters economy

Oil rose to the highest level in three days in New York as speculation supplies from Iran will be disrupted countered concern that economic growth will slow.

Iran called on Saudi Arabia to be “more wise and responsible” after the kingdom said it could make up for any supply loss resulting from a European ban on imports of Iranian crude. The International Energy Agency reduced its 2012 global oil demand forecast, after consumption fell in the fourth quarter for the first time since 2009, warning it may cut estimates further.

“Only Saudi Arabia is currently in a position to plug the gap from Iran,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “This fact should lend support to the oil price for the time being.”

Crude for February delivery on the New York Mercantile Exchange rose as much as 98 cents, or 1 percent, to $101.69 a barrel, the highest price since Jan. 12, and was at $101.15 at 12:37 p.m. London time. Floor trading was shut Jan. 16 for the Martin Luther King Jr. holiday and electronic trades were booked with yesterday’s transactions for settlement.

Brent oil for March settlement on the London-based ICE Futures Europe exchange was up 12 cents at $111.65 a barrel. The European benchmark crude was at a $10.33 premium to New York contracts for the same month. The spread closed at $10.66 yesterday, the lowest gap in nine days. It was a record $27.88 on Oct. 14.

‘Wise and Responsible’

Saudi Arabia can “easily” boost crude production to as much as 11.8 million barrels a day to offset a shortfall from Iran, Oil Minister Ali al-Naimi said in an interview with CNN on Jan. 16. The kingdom has the capacity to produce 12.5 million barrels a day and pumps about 9.8 million, he said.

“If this comment is the official stance of Saudi Arabia we advise Saudi officials to be more wise and responsible in their approach,” Iranian Foreign Minister Ali Akbar Salehi said yesterday, according to the state-run Fars news agency.

European Union foreign ministers are scheduled to meet Jan. 23 to decide on proposed sanctions on Iran’s oil imports, in a bid to halt its nuclear program.

The Persian Gulf state, the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, has threatened to block the Strait of Hormuz in retaliation. About 20 percent of the world’s oil flows through the waterway, which is 21 miles (34 kilometers) wide at its narrowest point, according to the U.S. Energy Department.

IEA Cuts Forecast

The U.S. asked South Korea to halve oil imports from Iran, the Dong-A Ilbo newspaper reported today, citing an unidentified government official. South Korea’s stance is to cut shipments by about 30 percent, according to the report. A U.S. delegation visits Japan today to push for sanctions support.

Worldwide crude consumption will increase by 1.1 million barrels a day this year, or 200,000 less than previously estimated, to 90 million barrels, the IEA predicted in its monthly market report.

BP Plc cut its estimate of global energy demand growth through 2030 to 1.6 percent annually from 1.7 percent a year ago, according to a statement on its website. Consumption will probably grow 40 percent in the next two decades, Chief Executive Officer Robert Dudley said in London today.

World Bank Outlook

The World Bank cut its global growth forecast by the most in three years, saying a recession in the euro region may exacerbate a slowdown in emerging markets.

The global economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, according to the World Bank in Washington. Turmoil in Europe has the potential to trigger a financial crisis reminiscent of 2008, the institution said.

Oil’s rally in New York may stall as stochastic oscillators on the daily and weekly charts remain above 70, signaling futures have advanced too quickly, according to data compiled by Bloomberg. Investors tend to sell contracts when prices are considered overbought.

Crude inventories in the U.S., the world’s largest oil consumer, probably increased 3 million barrels last week, based on the median estimate of nine analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Stockpiles have climbed the past three weeks to 334.6 million.

The industry-funded American Petroleum Institute in Washington will release its own supply data today.