By Grant Smith
Nov. 23 (Bloomberg) -- Crude oil rose from a one-week low after an Iranian military exercise renewed concerns over Middle Eastern supply, while the weaker dollar heightened oil’s appeal as an inflation hedge.
Iran is testing an air defense system this week, in the largest military exercises the country has conducted to assess the vulnerability of its nuclear plants. The most accurate dollar forecasters predict the world’s reserve currency will continue sliding even when the Federal Reserve begins to raise interest rates.
“The Iranian test is supportive psychologically,” said Eugen Weinberg, senior analyst at Commerzbank AG in Frankfurt. “The market will only focus on positive news for as long as the dollar is weak, the Fed is generous with liquidity and the wall of money keeps pouring into commodities.”
Crude oil for January delivery rose as much as $1.13, or 1.5 percent, to $78.60 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.44 at 11:18 a.m. London time.
The December contract expired on Nov. 20 down 74 cents, or 1 percent, to $76.72 a barrel. Oil traded between $74.79 and $82 the past five weeks after surging in early October.
“We are seeing the oil price higher today and a lot of that has to do with the fact the U.S. dollar is a bit softer,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “You get investment inflows into commodities as a hedge against dollar weakness.”
Iran Sanctions
Iran, the world’s fourth-largest oil producer, is under three sets of United Nations Security Council sanctions, the first imposed in December 2006, for its refusal to halt uranium enrichment for its nuclear program.
The U.S. and its European allies suspect Iran of using the program to develop atomic weapons. The government in Tehran says the technology is for domestic power generation.
The U.S. Dollar Index, a measure of the currency against its six major counterparts, dropped 0.8 percent today to 75.04 after posting its first weekly advance this month.
Standard Chartered Plc, Aletti Gestielle SGR, HSBC Holdings Plc and Scotia Capital Inc. say the dollar will depreciate as much as 7.1 percent versus the euro.
Hedge-fund managers and other large speculators decreased their bets on rising oil prices for a third week, according to U.S. Commodity Futures Trading Commission data.
Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 1.9 percent to 86,348 contracts in the week ended Nov. 17, the Washington-based commission reported last week.
Brent crude oil for January settlement rose as much as $1.27, or 1.65 percent, to $78.32 a barrel on London’s ICE Futures Europe exchange. It was at $78.47 a barrel at 11:17 a.m. London time. It fell 0.6 percent to $77.20 on Nov. 20.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
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