November 22, 2011 / 3:48 AM / 6 years ago

Oil up on Iran dispute, IMF lending moves

5 Min Read

NEW YORK (Reuters) - Oil prices rose in choppy trading on Tuesday as efforts to strengthen sanctions on Iran and regional unrest hiked the geopolitical fear premium and offset worries about global economic growth.

The euro rallied against the dollar and helped boost dollar-denominated oil after the International Monetary Fund beefed up its lending instruments and introduced a new six-month liquidity line designed to help countries at risk from the euro zone debt crisis.

"It's Iran sanctions, Egypt and Syria and even Libya today, putting the fear premium into prices, especially ahead of the (U.S. Thanksgiving) holiday," said Dominick Chirichella, senior partner, Energy Management Institute in New York.

The U.S, Britain and Canada on Monday announced new sanctions on Iran's energy and financial sectors to put more pressure on Tehran to abandon what the U.N.'s International Atomic Energy Agency said were attempts to use its nuclear program develop weapons.

ICE Brent January crude rose $2.15 to settle at $109.03 a barrel, breaking a string of four straight lower closes. Brent's intraday low on Monday was just above front-month Brent's 300-day moving average of $105.61, providing a technical boost, traders said.

U.S. January crude, up after three days of losses for front-month crude, rose $1.09 to settle at $98.01 a barrel, having swung from $96.55 to $98.70. Traders noted technical support accrued after a brief dip on Monday just below its 200-day moving average.

Brent's premium to its U.S. counterpart rose above $11 a barrel, strengthening a fourth-straight day after falling to $5.58 intraday on November 17.

Crude trading volumes remained tepid as Thursday's U.S. Thanksgiving holiday approached. Both Brent and U.S. crude volumes were about 19 percent below their 30-day averages with less than 30 minutes left in post-settlement trading.

Iran on Tuesday dismissed the new wave of sanctions, saying the West's attempts to isolate its economy would unite Iranians behind the government's nuclear program.

Turkey called on Syrian President Bashar al-Assad to step down, adding pressure on Damascus after Arab states threatened sanctions over Syria's crackdown on unrest.

Egypt's ruling generals offered to transfer power to a civilian president by July in an attempt to placate protesters.

A shootout involving one of Libya's heavily armed militias in a Tripoli gated compound used by foreign workers late on Monday highlighted security risks as Libya works to restart oil production shut by the civil war.

u.s. Oil Inventories

U.S. crude stocks fell 5.6 million barrels last week as imports fell, the industry group American Petroleum Institute said in its weekly report released late on Tuesday.

Gasoline stockpiles rose 5.4 million barrels and distillate stocks fell only 886,000 barrels, the API said.

U.S. crude oil stocks were expected to have risen 500,000 barrels, according to a Reuters survey of analysts taken ahead of the weekly inventory reports. Gasoline stockpiles were expected to be up 1.1 million barrels, while distillate stocks were expected to have fallen 1.3 million barrels.

The oil inventory report from the U.S. Energy Information will follow at 10:30 a.m. EST on Wednesday.

U.S. retail gasoline demand fell 1 percent last week from the previous week and 4.5 percent from a year earlier, MasterCard said in a separate weekly report.

Caution on Economy

Oil and equities prices felt pressure early on Tuesday from a weaker reading on U.S. third-quarter economic growth. .N

U.S. gross domestic product grew at a 2.0 percent annual rate in the third quarter, the U.S. Commerce Department said in its second estimate, down from the previously estimated 2.5 percent and below economists' expectations.

And the West is not the only region facing weak economic growth that could hurt oil demand going forward.

China's economy faces growing risks from Europe's sovereign debt crisis and from debt held by local Chinese governments, the World Bank said, though it said China could engineer a soft landing by easing monetary policy.

Additional reporting by Gene Ramos in New York, Ethan Bilby and Zaida Espana in London and Florence Tan in Singapore; editing by Bob Burgdorfer and Sofina Mirza-Reid

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