NEW YORK (DTN) — New York Mercantile Exchange oil futures rallied while the IntercontinentalExchange April Brent contract spiked to a 6-1/2 month spot high on reports Iran has cut off oil exports to six European countries in what looks like retalia
tion for a recent agreement by the European Union to embargo Iranian oil effective July 1.
Iran’s Oil Ministry denied those reports but the oil market moved sharply higher amid fear the latest development could escalate the already high tension between Tehran and the West over Iran’s pursuit of nuclear weapons. Tehran denies the charge.
The Iranian action comes alongside production outages in Canada and South Sudan, while supply is also restricted in Syria and Yemen.
Also underpinning support for oil futures was a pledge by China to invest in the euro-zone bailout fund, a move that could help resolve the two-year debt crisis and prevent a slide by the region’s economy into recession.
The pledge by Zhou Xiochuan, China’s central bank chief, sparked a rally for global equities and the euro while the dollar fell as risk trade returned.
Oil traders have been watching the euro-zone debt crisis closely, seeking to gauge the potential impact on oil demand. China’s pledge to provide help outweighed data showing the 17-nation euro-zone economy contracted by 0.3% in the fourth quarter of 2011.
The market will also await inventory data to be released from the Energy Information Administration at 10:30 AM ET.
Late Tuesday, the American Petroleum Institute released a primarily bearish report, showing U.S. crude inventories rising 2.9 million bbl in the week-ended Feb. 10, which nearly doubled consensus estimate for a 1.4 million bbl build. The API also reported that gasoline stocks jumped 1.8 million bbl for the week instead of an expected draw of 250,000 bbl while distillate stocks fell by a more-than-expected 2.2 million bbl.