Oil Increases for Third Day as Confidence Gains

Nov. 29 (Bloomberg) -- Oil rose for a third day in New York after U.S. consumer confidence climbed by the most in more than eight years and Iranian protesters broke into and vandalized the British Embassy’s compound in Tehran.

Futures increased as much as 1.6 percent as the Conference Board’s index rose to 56 in November. It was the biggest monthly gain since April 2003, figures from the New York-based private research group showed today. The attack on the embassy came a week after the U.S. and U.K. imposed additional sanctions on the country over Iran’s nuclear program.

“The consumer confidence numbers gave us a big pop,” said Phil Flynn, an analyst with PFGBest in Chicago. “The concerns about Iran are increasing. The attack on the British embassy is an escalation and the new sanctions could have an impact on oil supply in the near future.”

Crude oil for January delivery rose 95 cents, or 1 percent, to $99.16 a barrel at 11:30 a.m. on the New York Mercantile Exchange. The contract climbed to $99.79 and dropped as low as $97.23 during the session. Prices are up 8.5 percent this year.

Brent oil for January settlement gained $1.38, or 1.3 percent, to $110.38 a barrel on the London-based ICE Futures Europe Exchange.

The confidence gauge, at a four-month high, signaled that consumers grew more upbeat about employment and income prospects in the U.S., the world’s largest energy-consuming country. The figure exceeded the most-optimistic forecast in a Bloomberg News survey of economists.

Iranian Protest

The protesters in Iran chanted slogans, including “death to the U.K.” and “the U.K. Embassy must be shut,” state-run Press TV reported from the scene.

During the 1979 revolution that ousted pro-western Shah Mohammad Reza Pahlavi and brought Shiite Muslim clerics to power, students seized the U.S. Embassy in Tehran and held 52 diplomats hostage for 444 days, leading the U.S. to sever ties with Iran. The revolution caused Iranian oil production to drop by 3.9 million barrels a day from 1978 to 1981, according to the U.S. Energy Department.

“The attack today reminds one of the Jimmy Carter years and the seizure of the U.S. embassy,” Flynn said.

Iran is the second-largest oil producer in the Organization of Petroleum Exporting Countries after Saudi Arabia. About 15.5 million barrels of oil a day, the equivalent of about a sixth of global consumption, flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department.

Debt Crisis

Oil prices also rose before euro-area finance ministers meet to discuss insuring a portion of bonds issued by debt- stricken countries. Ministers from the 17-member monetary union will meet in Brussels tonight to debate using their bailout fund to insure sovereign debt with guarantees.

“The situation in Iran seems to be inching towards a conclusion that won’t be good for the oil outlook,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “Also, Europe hasn’t fallen apart and may actually be making progress in dealing with the debt crisis. That’s helping both equities and the oil market because of the implications it has for the economy.”

Demand for Italy’s 2014 bonds was 1.5 times the amount on offer, up from 1.35 times at the previous auction. The 2014 note yielded 7.89 percent, the highest since September 1996 for a three-year bond and up from 4.93 percent when similar-maturity debt was sold last month.

“Everything appears to be swinging on the Italian bond auction,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The good news is that they were able to sell their three-year notes. The bad news is that they had to sell at such a high premium.”

--Editors: Margot Habiby, Bill Banker

To contact the reporter on this story: Mark Shenk in New York at [email protected]

To contact the editor responsible for this story: Dan Stets at [email protected]