August 13th, 2012

Crude oil brent rose to a three-month high amid concern that Middle East political tension may disrupt oil supplies.

Brent climbed as much as 1.9 percent after the U.S. said one of its guided-missile destroyers collided with an oil tanker near the Strait of Hormuz in the Persian Gulf. Israel will hold home defense drills this week as the Haaretz daily reported that the nation is considering a strike against Iran over its nuclear program. Brent has advanced 17 percent since European Union sanctions against Iran took effect last month.

“The geopolitical risk premium is not decreasing,” Olivier Jakob, managing director at Petromatrix GmbH, a Zug, Switzerland-based researcher, which estimates price levels are high enough to discourage consumption.

Brent oil for September settlement on the London-based ICE Futures Europe exchange climbed as much as $2.16, or 1.9 percent, to $115.11 a barrel,, the most since May 4. The contract was at $114.50 at 1:17 p.m. local time and the more- actively traded October futures were up $1.42 at $112.53.

Crude oil futures for September delivery rose as much as $1.07 to $93.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 49 cents to $92.87 on Aug. 10. The European benchmark’s premium to West Texas Intermediate in New York widened to as much as $21.19 a barrel, the biggest spread since April 5.

The spread between the two grades has widened amid maintenance shutdowns at North Sea fields that are the physical basis of the Brent futures contract. BP Plc (BP/) on Aug. 10 said it will close its Ninian Pipeline System in the area for 10 days.

Crude Oil: Bullish Bets

The North Sea market is “extremely tight,” Sabine Schels, a commodity strategist at Bank of America Corp., wrote in a report sent by e-mail today.

Hedge funds raised bullish bets on futures in New York by the most in more than 17 months. Money managers boosted net-long positions on crude, or wagers that prices will rise, by 20 percent in the seven days ended Aug. 7, according to the U.S. Commodity Futures Trading Commission’s weekly report Aug. 10. That’s the biggest gain since March 1 last year, when Libyan output dropped.

Oil in New York has technical resistance along the upper Bollinger Band on the daily chart, around $94.84 a barrel today, according to data compiled by Bloomberg. Futures halted their advance near this indicator the past four days. Sell orders tend to be clustered close to chart-resistance levels.

Crude Oil: Military Vessels

In London, hedge funds and other money managers raised their bullish bets on Brent crude by 4,894 lots, or 5.7 percent in the week ended Aug. 7, according to data from ICE Futures Europe.

Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 90,959 contracts in the week ended Aug. 7, the London-based exchange said today in its weekly Commitment of Traders report. Net longs were at 86,065 on July 31, the data show.

The U.S. said yesterday one of its destroyers had a collision with a tanker near the Strait of Hormuz, a transit route for a fifth of global crude shipments. The USS Porter hit the Panamanian-flagged M/V Otowasan at about 1 a.m. local time, said Bahrain-based U.S. 5th Fleet spokesman Lieutenant Greg Raelson. The incident wasn’t combat-related, he said.

“It does raise the main issue in this area,” Dominick Chirichella, a senior partner at the Energy Management Institute in New York, said in a note to clients. “A large number of military vessels are patrolling the area which, as we have seen, increases the possibility of accidents and thus the potential to slow the flow of traffic through this area.”

Crude Oil: Iraqi Output

U.S. ships are patrolling the Strait as Iran has threatened to block the waterway in retaliation for sanctions targeting its nuclear program. Israeli leaders are leaning toward a strike on the country before U.S. elections in November despite opposition to such a move by the security establishment, the Haaretz daily reported Aug. 10.

Iraq’s daily crude production climbed to 3.2 million barrels and will reach 3.4 million barrels by year’s end as planned, according to Deputy Prime Minister for Energy Affairs Hussain al-Shahristani. That would be the fastest rate in more than 20 years. The country’s output has surpassed that of Iran and Kuwait, al-Shahristani said yesterday in Baghdad.

The average price of regular gasoline at U.S. filling stations rose 18.38 cents in the past two weeks, the most this year, to $3.6896 a gallon, according to Lundberg Survey Inc. The Camarillo, California-based company surveyed about 2,500 stations for the period to Aug. 10.

- Ben Sharples in Melbourne and Grant Smith in London at Bloomberg.