Oil surges nearly $4, then eases, eyeing Iran

Tue Dec 13, 2011 2:26pm EST
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By Robert Gibbons

NEW YORK (Reuters) - Oil rose on

Tuesday and briefly surged nearly $4 a barrel in a furious burst of trading that traders attributed to renewed jitters over Iran, expectations of further monetary easing and possibly computer-driven trading.

Brent and U.S. crude prices shot up quickly at 9:45 a.m. EST (1445 GMT), adding to gains and briefly rising more than $3 as volumes surged in one of the most concentrated bursts of trading activity in months.

Other commodity markets did not jump, and traders and analysts remained unable to pinpoint a specific trigger for the price surge and news of a collision shutting the Houston Ship Channel was added to the mix.

Brent January crude rose $2.30 to $109.56 a barrel by 1:48 p.m. EST (1848 GMT), off a session high of $111.10 a barrel. U.S. crude rose $2.44 to $100.21 a barrel, after reaching a $101.25 high.

Crude trading volume eased after the surge. U.S. crude trading volume was about 9.5 percent below the 30-day average in afternoon trading in New York, while Brent volume was about 12 percent below the 30-day average.

Several traders pinned the move 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 U.S. Federal Reserve, in a one-day policy meeting on Tuesday, could be mulling a third round of quantitative easing, known in financial markets as QE3.   Continued...