By Brian Baskin
December 29, 2009
Source: 

NEW YORK –Crude futures rose Tuesday as the market awaited new data on U.S. oil inventories while a crackdown on opposition in Iran raised questions about the major oil producer’s stability.

Light, sweet crude for February delivery recently traded 57 cents, or 0.7%, higher at $79.34 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 67 cents higher at $77.99 a barrel.

Traders are anticipating oil and fuel inventory data from the American Petroleum Institute, an industry group, after settlement Tuesday, as well as official government data Wednesday. Analysts are expecting draws on oil and distillate stocks, including heating oil and diesel, which would add to the belief that a glut built up earlier in the year is vanishing.

With little volume during what is usually the quietest week of the year, a handful of trades off of unexpectedly positive or negative indicators can have an outsized impact on futures.

Prices could touch $80 a barrel this week, mostly thanks to “window dressing” that is unlikely to continue providing support with the start of the new year, wrote Jim Ritterbusch, president of the trading advisory firm Ritterbusch & Associates.

Some barrels have been moved to storage offshore to avoid end-of-year tax charges, and the government inventory statistics could swell again if demand doesn’t pick up, he wrote.

Progress in the U.S. economic recovery, seen as a key to restoring oil demand, has been uneven. In the latest in a long series of ambiguous indicators, the S&P/Case-Shiller home price index saw a smaller decline from a year earlier in October, but no improvement from previous months.

At the same time, continued unrest in Iran is making some traders wary of pushing prices lower.

Deadly clashes between security forces and protesters broke out over the weekend, and the government has arrested leading opposition figures. The fighting took place far from the country’s oil producing region, but investors are pricing in the possibility of more widespread disruptions.

“While we wait for events to unfold, the tensions are being picked up by the crude oil markets and reflected in the firmer prices we are seeing,” wrote Ed Meir with MF Global.

A second source of support Monday, Russia’s threat to withhold oil from Europe in a dispute with Ukraine over transit fees, was defused when the two countries reached an agreement.

Front-month January reformulated gasoline blendstock, or RBOB, recently traded 1.89 cents, or 0.9%, higher at $2.0373 a gallon. January heating oil traded 4.16 cents, or 2%, higher at $2.1151 a gallon.

-By Brian Baskin, Dow Jones Newswires; 212-416-2453; .