Oil Prices Rebound as Nigeria, Iran Tensions Escalate

NEW YORK (TheStreet) -- Oil prices were rebounding Tuesday on signs of strengthening consumer sentiment in the U.S., the possibility that Iran could shut down the crucial Strait of Hormuz oil route and the potential for supply disruptions out of Nigeria.

West Texas Intermediate (WTI) light sweet crude oil for February delivery was spiking $1.39 to $102.70 a barrel, while the March European Brent crude futures contract was rising 68 cents to $113 a barrel.

In Nigeria, a nationwide strike over the elimination of fuel subsidies is underway, and market participants are keeping an eye out for how this might impact crude exports from Africa's largest oil exporter.

Fuel costs in the West African country have doubled since the subsidy ended on Jan. 1.

"While the strike has not yet had an impact on oil trade, a potential disruption of Nigerian crude exports would have a substantial impact on the market," say JBC Energy analysts.

Supply-side concerns were also being fueled by remarks over the weekend by General Martin Dempsey, chairman of the U.S. Joint Chiefs of Staff, that Iran has the ability to close down the Strait of Hormuz waterway in response to any threat of Western sanctions against the Islamic republic over its nuclear program. U.S.-Iran tensions escalated further Monday after a 28-year-old American and former Marine was convicted of spying for the CIA and sentenced to death in Iran.

Evidence of improving U.S. consumer sentiment was also having a bullish effect on oil prices. On Monday, the U.S. Federal Reserve said that consumer borrowing in the country rose in November to a ten-year high, a sign that Americans are becoming more confident about taking on debt and banks are becoming more confident about lending. Credit surged by $20.40 billion to $2.48 trillion, Federal Reserve said. However, the news had little impact on the markets.

Energy stocks were rising in premarket trading Tuesday. BP (BP) was rising 1.2% to $44.59; Chevron (CVX) was adding 1.2% to $110.75 Exxon (XOM) was up 0.9% to $86.25; Apache (APA) was up 1% to $99.78; Schlumberger (SLB) was gaining 1.4% to $69.80; ConocoPhillips (COP) was rising 0.8% to $73.50; and Anadarko (APC) was rising 1% to $81.58.

-- Written by Andrea Tse in New York.



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