Oil Trades Near Nine-Month High After Iran Denies Access to UN Inspectors

Oil traded near a nine-month high after United Nations inspectors in Iran were denied access to a suspected nuclear site, raising concern that tensions between OPEC’s second-biggest producer and Western nations may escalate.

Futures were little changed after the International Atomic Energy Agency said Iran refused permission to visit the Parchin military base during two days of talks that ended yesterday. An Iranian military commander said his nation would consider pre- emptive action if it is threatened. Crude pared earlier gains as an index of manufacturing in China indicated factory activity will may decline a fourth month.

“The fact that the inspectors couldn’t see what they wanted to see is also fuel on the fire,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “Any action, especially in the Strait of Hormuz, will certainly push up oil prices much higher than these levels.”

Oil for April delivery on the New York Mercantile Exchange rose as much as 16 cents to $106.41 a barrel, the highest price since May 5, and was at $105.94 at 9:13 a.m. London time. Prices have gained 13 percent in the past year.

Brent oil for April settlement was down 24 cents at $121.42 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was little changed at $15.48.

Nuclear Program

Israel and the U.S. have said all options are on the table in ensuring the Persian Gulf nation doesn’t acquire atomic weapons. Iran says its nuclear program is for energy.

“We will no more wait to see enemy action against us,” the state-run Fars news agency quoted Mohammad Hejazi, deputy head of the general staff of Iran’s armed forces, as saying.

Speculation that oil supplies will be disrupted has increased as tension between Iran and Western nations escalates, David Greely, head of energy research at Goldman Sachs Group Inc. in New York, said in a report today. The bank maintained a recommendation that investors buy Brent contracts for July 2012 to take advantage of rising prices.

The Islamic Republic said it cut oil sales to the U.K. and France and has threatened to shut the Strait of Hormuz, a chokepoint for tankers, in response to tightening sanctions over its nuclear program.

Oil’s rally in New York may stall after the 14-day relative strength index climbed above 70, according to data compiled by Bloomberg. A reading higher than that level signals futures may have risen too quickly and further gains probably aren’t sustainable. Investors tend to sell contracts when prices are considered overbought.

Slowing Growth

Prices fell earlier on signs global growth may slow. An index of manufacturing in China, the second-biggest oil user, from HSBC Holdings Plc and Markit Economics came in at 49.7 for February, signaling factory activity will shrink a fourth month as Europe’s sovereign-debt crisis damps exports and the housing market cools. A reading below 50 points to a contraction.

Agreement on a second bailout for Greece may not be enough to end Europe’s debt crisis and countries in the euro-area periphery must reduce debt and improve competitiveness, Bank of England Deputy Governor Charlie Bean said in a speech yesterday in Glasgow, Scotland.

Crude inventories in the U.S., the world’s biggest user of the commodity, probably climbed to the highest level in almost five months as rising North American output and the planned reversal of the Seaway pipeline bolstered stockpiles, the Bloomberg News survey showed before tomorrow’s Energy Department report.

Gasoline supplies declined 250,000 barrels last week, according to the median of eight analyst estimates in the survey. Distillate inventories, a category that includes diesel and heating oil, probably fell 1.38 million barrels.

The Energy Department is scheduled to release its weekly report at 11 a.m. tomorrow in Washington, a day later than usual because the government and financial markets were closed for the Presidents’ Day holiday. The industry-funded American Petroleum Institute will publish its own data today.

Bloomberg