Also, growing fears o

f a potentially messy debt default by Greece were pressuring oil futures after the European Union delayed a decision to approve a bailout package for Athens.

Oil rallied on Wednesday on bullish U.S. inventory data and reports Iran halted crude supplies to six European countries, but there have been many conflicting reports since then.

Iranian state media reports were confusing at best while Iran’s oil ministry has denied they had stopped exports. Analysts also said such a move was unlikely as Iran needed money and is currently having problems selling its oil because of the EU embargo and tough sanctions by the United States.

On Greece, EU finance ministers on Wednesday failed to reach a deal on a bailout package for Athens, delaying a decision on the issue until another meeting scheduled for Monday. Greece needs the $170 billion bailout fund by March 20, which is the deadline to pay its bondholders.

Analysts fear that a failure to get the money could lead to a chaotic debt default for Greece, which could spook markets and trigger a slide into recession for the euro zone.

Worries over Greece pushed the euro to a three-week low versus the U.S.

dollar as investors were risk averse, with a stronger greenback adding pressure on oil futures. European equities and U.S. stock futures were lower ahead of a raft of U.S. economic data to be released later this morning.

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.

The overnight gains were driven l

argely by upbeat macroeconomic data from Germany, worries over escalating tension between Iran and the West and extended supply disruptions in Canada and South Sudan.

Investor confidence surged in Germany to a 10-month high in February as economic growth improved and the euro-zone’s debt crisis showed signs of easing, according to ZEW Center for European Economic Research or ZEW Index.

The German data helped to offset a credit downgrade by ratings agency Moody’s Investors Services of six European countries, including top-rated Britain, France and Austria.

Investors also focused on efforts to resolve Europe’s sovereign debt crisis. European Union finance ministers are set to meet on Wednesday to sign off on a package of new austerity measures approved over the weekend by the Greek parliament.

Meantime, ongoing tension over Iran’s nuclear program was exacerbated after Israel blamed Iran for Monday’s attacks on its diplomats in India and Georgia. Some analysts speculated the attacks were the first in a wave of assaults on Israeli targets by Iran and Israel may be forced to retaliate.

Israel has reportedly been planning to launch unilateral attacks this spring to degrade Iran’s nuclear program.

An EU embargo on Iranian oil is scheduled to go into effect on July 1, while Iran has threatened to close the Strait of Hormuz if the EU goes ahead with the embargo. The EU embargo and tougher sanctions by the United States has made it increasingly difficult to sell Iranian oil, analysts said.

In Africa, a dispute between Sudan and South Sudan escalated today, with reports that Sudanese warplanes dropped several bombs wounding four soldiers in South Sudan two days after signing a non-aggression pact.

The two countries resumed talks Monday to defuse a transit fee dispute that led to the shut-in of 350,000 bpd of oil output from South Sudan about two weeks ago.

Also, Canada’s oil sands production is now expected to be shut-in for much longer than previously anticipated, which would tighten supply in the U.S. Midcontinent and boost NYMEX crude futures.

“Crude oil markets are in a buoyant state, with WTI receiving temporary support as the Horizon oil sands plant takes longer than expected to restart,” said a note from Barclays Capital.

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NEW YORK (DTN) — New York Mercantile Exchange oil futures were mixed at last look this morning, with March crude and heating oil contracts slightly higher after paring overnight gains while March RBOB was lower.
The overnight gains were driven largely by upbeat macroeconomic data from Germany, worries over escalating tension between Iran and the West and extended supply disruptions in Canada and South Sudan.
Investor confidence surged in Germany to a 10-month high in February as economic growth improved and the euro-zone’s debt crisis showed signs of easing, according to ZEW Center for European Economic Research or ZEW Index.
The German data helped to offset a credit downgrade by ratings agency Moody’s Investors Services of six European countries, including top-rated Britain, France and Austria.
Investors also focused on efforts to resolve Europe’s sovereign debt crisis. European Union finance ministers are set to meet on Wednesday to sign off on a package of new austerity measures approved over the weekend by the Greek parliament.
Meantime, ongoing tension over Iran’s nuclear program was exacerbated after Israel blamed Iran for Monday’s attacks on its diplomats in India and Georgia. Some analysts speculated the attacks were the first in a wave of assaults on Israeli targets by Iran and Israel may be forced to retaliate.
Israel has reportedly been planning to launch unilateral attacks this spring to degrade Iran’s nuclear program.
An EU embargo on Iranian oil is scheduled to go into effect on July 1, while Iran has threatened to close the Strait of Hormuz if the EU goes ahead with the embargo. The EU embargo and tougher sanctions by the United States has made it increasingly difficult to sell Iranian oil, analysts said.
In Africa, a dispute between Sudan and South Sudan escalated today, with reports that Sudanese warplanes dropped several bombs wounding four soldiers in South Sudan two days after signing a non-aggression pact.
The two countries resumed talks Monday to defuse a transit fee dispute that led to the shut-in of 350,000 bpd of oil output from South Sudan about two weeks ago.
Also, Canada’s oil sands production is now expected to be shut-in for much longer than previously anticipated, which would tighten supply in the U.S. Midcontinent and boost NYMEX crude futures.
“Crude oil markets are in a buoyant state, with WTI receiving temporary support as the Horizon oil sands plant takes longer than expected to restart,” said a note from Barclays Capital.

Path:

ond bailout needed by Athens to avoid default.

European Union finance ministers are now scheduled to meet Wednesday in Brussels to sign off on a $170 billion bailout Greece needs to pay bondholders next month. Greece will still need to convince EU ministers it will follow through on the measures before getting the funds, but investors were encouraged this morning by the vote.

The issue is important for oil traders because if Greece can’t solve its debt problems, it could affect other euro zone countries, which could lead to an economic slowdown and lower oil demand, said analysts.

Major euro zone bourses rallied as risk trade returned, and U.S. stock indices are heading for higher open on Wall Street. The euro rebounded to a two-week high against the dollar, with a weaker dollar supporting higher oil futures.

Oil futures also continue to be boosted by ongoing tension between Iran and the West over Tehran’s nuclear ambition, which triggered an EU oil embargo scheduled to start on July 1, and violence in Syria that has added a risk premium and worries about supply.

Perhaps seeking to further inflame the tension, Iranian President Mahmoud Ahmadinejad said on Saturday that Tehran will soon announce advances in its nuclear program.

“Crude oil markets are buoyant in early trade today, supported by amplifying geopolitical undertones, while healthy underlying demand remains,” said a note from Barclays Capital.

Meanwhile, there were signs of progress in Africa after Sudan and South Sudan on Sunday agreed to resume talks over disputed transit fees that led to the shutdown of 350,000 bpd oil output nearly two weeks ago.

ts global oil demand growth forecast.

European finance ministers on Thursday refused to approve an austerity deal worked out by the Greek government until the measures are formally passed into law. They also demanded more spending cuts before Greece gets a second bailout fund needed to avoid a chaotic debt default.

Greek Finance Minister Evangelos Venizelos left the Brussels meeting telling reporters that Greece faced a choice of staying in the euro or leaving in a parliamentary vote this weekend on the needed austerity measures.

The uncertainty from the Greek crisis caused the euro to slip from a two-month high against the dollar this morning, with a stronger greenback bearish on oil futures. European equities also fell while Wall Street is set for a lower open.

Meantime, the IEA this morning revised down its global oil demand growth forecast for 2012 by 300,000 bpd from last month’s estimate, citing a slowing economic growth rate.

Global oil demand for this year is expected to grow by 800,000 bpd or 0.9% from 2011′s consumption rate to 89.9 million bpd, the IEA said in its February Oil Market Report.

The revision to IEA’s demand forecast comes on the heels of a similar move on Thursday by the Organization of Petroleum Exporting Countries. OPEC slashed 120,000 bpd from its estimate of oil demand growth for this year.

The downside for oil futures was, however, limited by oil supply disruptions as a result of political differences in Syria and South Sudan, while escalating tension between Iran and the West is also adding a risk premium to the price of oil.

nd bailout package needed to avoid a chaotic default on its debt.

The broader market was also boosted by a Labor Department report showing U.S. initial jobless claims dropped 15,000 to 358,000 in the week-ended Feb. 4. Market consensus called for 370,000 claims for the week, with the decline offering further evidence the labor market is improving which augers well for gasoline demand going forward.

U.S. stock futures reversed higher after the jobs report, and the upside was further boosted by reports from Athens saying Greek leaders have reached a tentative agreement on new spending cuts demanded by creditors to release a $173 billion bailout.

The euro rose to a fresh two-month high against the dollar as risk trade accelerated. The dollar is considered a safe asset and investors use oil to hedge against the greenback. A weaker dollar is bullish for oil futures.

Meantime, the upside for oil prices was also supported by freezing weather in Europe that is boosting heating demand and concerns over supply disruptions in South Sudan and Canada.

Rising tension between Iran and the West also remains an issue of concern to many traders of ICE Brent futures while refinery outages boosted NYMEX products futures

At the 9:00 AM ET NYMEX opening bell, March crude futures were up 80cts at $99.51 bbl, and have since traded to a session high of $100.03.

NYMEX March heating oil futures opened up 0.42cts at $3.1937 gal after inside trade. March RBOB futures opened 2.76cts higher at $3.0028 gal and have since posted a better than five-month spot high at $3.0091.

debt crisis.

A stronger greenback is typically bearish as traders frequently use the currency to hedge against oil.

The selloff followed a deadlock in talks to restructure Greek debt.

Greece needs another bailout payment to enable it to pay $19 billion in debt in the coming weeks, but the talks between Athens and its creditors fell apart over the weekend.

German Chancellor Angela Merkel said this morning that there won’t be any more bailout money for Greece unless Athens cuts more spending. A failure to agree on a deal could spark a debt default and jeopardize the global economy, analysts said, offsetting optimism from a bullish U.S. jobs report that boosted markets on Friday.

However, tensions between Iran and the West and the disruption to oil supply from South Sudan are likely to put a floor under losses, analysts said.

This weekend, Iran reiterated a threat to halt oil exports to Europe ahead of a European Union embargo that’s scheduled to come into effect on July 1.

Reuters also reported that China will halve its crude oil imports from Iran in March from the year-ago level, as a dispute over payments and prices stretches into a third month. China, which is the main buyer of Iranian oil, has cut imports by 285,000 bpd since January, the report said.

Also, there are increasing fears that Israel could launch a strike on Iran’s nuclear facilities as early as April, which would escalate tensions.

Tehran has threatened to retaliate against any attacks.

In Africa, some 350,000 bpd of crude oil from South Sudan have been shut-in over past one week due to differences over oil transit fees with Sudan.

The Energy I

nformation Administration’s data on Wednesday showed a 4.2 million bbl build for U.S. crude inventories last week, with implied demand for products sluggish.

The EIA data prompted profit taking after oil prices rallied earlier following data showing the purchasing managers’ index for manufacturing expanding in the United States, Germany and China.

U.S. manufacturing grew in January at the fastest pace in seven months as exports rose, the Institute for Supply Management said Wednesday, while the Commerce Department said construction spending rose 1.5% in December, the fifth straight monthly gain.

Despite an upbeat outlook for global factory activity, oil traders remain cautious ahead of testimony before a Congressional panel later today by Federal Reserve Chairman Ben Bernanke.

The Fed chief last week prompted a broader market rally after signaling that additional quantitative easing was in the cards as a full economic recovery could take at least three more years.

Also in the background are risks to oil supply from Africa and Iran that could support the upside for oil prices.

U.S. lawmakers are considering more sanctions targeting Iran’s state oil company as well as top Iranian leaders. These U.S. measures would come on top of an oil embargo by the European Union agreed last week that will take effect in July.

In Africa, an ongoing dispute over transit fees between Sudan and South Sudan led to the shut-in of 350,000 bpd of crude while Nigeria slipped deeper into turmoil, which added to supply fears, after security forces arrested the leader of a militant Islamist group.

The optimism that buoyed oil and equities markets this morning came after 25 of the 27 EU countries agreed to a new treaty that would ensure closer supervision of their budgets in an effort to prevent a debt crisis in the future. Britain and the Czech Republic didn’t join the compact.

Meantime, Greek Prime Minister Lucas Papademos raised hopes that a deal would be reached this week to avoid a potentially chaotic debt default.

Greece is negotiating with its bondholders over debt restructuring.

Success of the talks is crucial because Athens expects to get a new bailout fund. As a result, the euro rose against the dollar, which in turn boosted oil prices.

The oil upside was also underpinned by lingering worries over risks to supply, with tension between Iran and the West escalating as the United States steps up pressure on Tehran to halt its nuclear program. U.S.

lawmakers were considering additional sanctions on top of an EU embargo on Iranian oil.

March Brent on ICE Futures was the most actively traded contract, with high volatility reportedly caused by computer-driven trading. A surge in volume had occurred as the Brent market went through a key buying level identified by one automated system.

March Brent futures briefly jumped to a two-week spot high of $113.90 bbl while March West Texas Intermediate crude futures on the NYMEX posted a three-session high on the continuation chart at $100.69 bbl, with the Brent premium over WTI now at $12.17 bbl. NYMEX February heating oil futures soared to a two-week spot high of $3.1040 while February RBOB futures stayed within Monday’s price range.

Also, a potential strike by U.S. oil refinery workers this week and the prospects of cold weather next week were supported the oil rally, said analyst Thomas Finlon at Energy Analytics Group in Jupiter, Florida.

Later today, oil traders will turn their attention to weekly oil supply data, with some analysts expecting to see a build for crude stocks and draws for products supply.

CRANBURY, N.J. (DTN)
– New York Mercantile Exchange nearby delivery oil futures were higher
overnight, with the heating oil contract posting a better than one-week high
w

hil

e crude held within Thursday’s trade range.

February RBOB futures posted a fresh 3-1/2 month spot
high at $2.8654 gallon.

Oil futures are
extending gains triggered by Wednesday’s announcement by the Federal Reserve
that they would maintain the federal fund rate near zero through the end of
2014, beyond December’s guidance that it would keep the ultra-low rate through
mid-2013, and six months longer than the market expected. The Fed also laid the
groundwork for a third round of quantitative easing, which refers to active
market participation by the central bank in federal instruments such as bonds.

The Fed’s action stirred bullish sentiment
for U.S. economic growth, with an expanding economy using more energy.
Additionally, a weaker dollar has an inflationary impact on oil prices, while
near-zero interest rates drive investment dollars into equities and
commodities.

This morning,
the U.S. dollar was holding to an inside trade day in spot index trading,
edging off Thursday’s seven-week low. The S&P 500 were lower in futures
trading after an impressive move higher in January, reaching a six-month high
midweek.

Economic data
sets have supported a view that the U.S. economy is on the mend nearly three
years after the end of the Great Recession, although the recovery is uneven.
Housing data shows a sluggish and bumpy recovery, while the U.S. unemployment
rate was at 8.5% in December.

The Bureau of
Economic Analysis will release its advanced estimate for fourth quarter 2011
U.S. Gross Domestic Product at 8:30 AM ET.

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