Oil rose for a second day in New York on forecasts that US crude stockpiles declined for a second week and speculation that further sanctions against Iran will curb supply from the second-largest producer in the Organisation of Petroleum Exporting Countries (Opec).
Futures advanced as much as 1.5 per cent, extending yesterday's 0.4 per cent gain. US crude inventories fell by two million barrels last week, according to a Bloomberg News survey. Gulf Cooperation Council leaders are in Saudi Arabia for a meeting that may address responses to Iran's nuclear programme.
"In the US, the economy is on the road to recovery, with falling unemployment and consistently improving growth against a background of low and falling oil stockpiles," said Christopher Bellew, a senior broker at Jefferies Bache Ltd. "In Europe growth is virtually non-existent."
Crude for January delivery climbed as much as $1.42 to $95.30 a barrel in electronic trading on the New York Mercantile Exchange. The contract, which expired late last night, was at $95.19 at 12:06pm London time. The more actively traded February future gained $1.02 to $95.07. Prices are 4.2 per cent higher this year after rising 15 per cent in 2010.
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Brent oil for February settlement on the London-based ICE Futures Europe exchange rose as much as $1.94, or 1.9 per cent, to $105.58 a barrel.
The European benchmark contract was at a premium of $9.97 to New York-traded West Texas Intermediate grade for the same month. The front-month spread widened to a record $27.88 on October 14.
Crude may surge $40
Oil may surge by $40 a barrel if sanctions halt supplies from Iran, Francisco Blanch, Bank of America Corp's head of commodities research in New York, said in a report. Iran is the second-largest producer in Opec after Saudi Arabia.
Iran may face new sanctions that target its crude trade as the European Union and other importers seek to intensify pressure over its nuclear programme.