Forexpros – Crude oil futures added to sharp gains in the first trading session of the new year on Tuesday, rallying to a seven-week high after data showed that manufacturing activity in the U.S. expanded at the fastest pace since June last month, while simmering tensions between the U.S. and Iran provided further support.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD102.77 a barrel during U.S. morning trade, soaring 2.99%.
Prices earlier rose by as much as 3.1% to trade at USD102.81 a barrel, the highest since November 17.
NYMEX trading remained closed on Monday due to the New Year’s holiday.
The U.S. Institute for Supply Management said earlier that its index of purchasing managers rose to 53.9 in December from 52.7 in November, beating expectations for a reading of 53.2.
The report came after official data showed that Chinese manufacturing activity returned to expansionary territory in December after contracting in November.
The U.S. and China are the world’s two largest oil consuming nations and manufacturing numbers are used as indicators for fuel demand growth.
Meanwhile, reports that Iran had produced its first nuclear fuel rod added to ongoing concerns over a potential disruption to Iranian oil supplies.
The report came after the Islamic Republic said it had test-fired two long-range missiles over the weekend as part of an ongoing naval drill in the Strait of Hormuz.
Iran has threatened to close the strait as possible retaliation to new U.S. economic sanctions over Iran’s nuclear program.
U.S. President Barack Obama signed a law on Saturday imposing tougher financial sanctions that could for the first time hurt Tehran’s oil exports, while the European Union is due to consider similar steps soon.
The Strait of Hormuz, located between Iran and Oman, is one of the most important oil-shipping channels in the world, handling about 33% of all ocean-borne traded oil, according to the U.S. Energy Information Administration.
Iran is the world’s fourth largest oil producer, pumping nearly 5% of the world’s oil in 2010. The threat of a major supply disruption from the country has helped support oil prices in recent weeks.
Weakness in the U.S. dollar also contributed to gains. The euro rose nearly 1% against the greenback, while the dollar index was down 0.82% to trade at 79.92.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery soared 3.85% to trade at USD111.36 a barrel, with the spread between the Brent and crude contracts standing at USD8.59 a barrel.
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