* Norway oil unions decide against escalating strike
* U.S. crude stocks expected to have fallen-poll
* Coming up: API oil data, 4:30 p.m. EDT Tuesday (Recasts, updates prices, market activity; adds API data)
By Robert Gibbons
NEW YORK, July 3 (Reuters) – Brent crude rose more than 3 percent on Tuesday, topping $100 a barrel as rising tensions over Iran’s nuclear program sparked oil’s second rally in three sessions after a second-quarter slide.
Revived hopes for more economic stimulus also supported oil prices as the U.S. crude contract settled more than 4 percent higher.
Over the past three sessions, Brent is up 10 percent and U.S. crude nearly 13 percent. Both ended the second quarter with their biggest quarterly losses since 2008.
Iran said it had successfully tested missiles capable of hitting Israel in response to threats of military action against the Islamic Republic over its nuclear ambitions.
“I think this is positioning for geopolitical risk in the Middle East,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.
“Given that oil prices are low, buying in here is cheap portfolio insurance in case an event occurs,” he added.
Brent prices have recovered from an 18-month low of $88.49 a barrel set on June 22, having retreated from the 2012 peak above $128 hit in early March.
Brent rose $3.34 to end at $100.68 a barrel, the highest settlement since May 31. Prices reached $101.58, the loftiest intraday price since front-month Brent reached $101.90 on June 11.
U.S. crude jumped $3.91 to settle at $87.66 a barrel, the highest close since May 30, after reaching $88.04 intraday.
Traders and analysts also pointed to short-covering ahead of the U.S. Independence Day holiday on Wednesday.
U.S. gasoline, up nearly 10 cents, and heating oil futures also rallied ahead of Wednesday’s holiday.
Brent trading volume outpaced turnover for U.S. crude, with volume for both eclipsing their 30-day averages.
In Norway, an oil and gas workers’ strike was another factor supporting oil prices. The strike has slowed crude shipments from the world’s eighth-largest oil exporter, although unions on Tuesday decided against escalating the action for now.
REFOCUS ON IRAN
Iran made its missile-test announcement after Iranian parliamentarians proposed a bill urging it to stop tankers taking oil to supporters of U.S.-led sanctions and a European Union embargo from passing through the Strait of Hormuz.
Iran had previously threatened to shut the strait if the EU went through with its embargo threat. About 17 million barrels a day of oil — almost a fifth of global production — from the top Middle East producers sailed through the strait in 2011.
The EU embargo on Iranian oil took full effect on Sunday after the latest talks between Tehran and major world powers in June failed to move the parties closer to resolving the dispute over Iran’s nuclear program.
U.S. equities rallied for a third day, also on expectations for economic stimulus and as oil’s price gains lifted energy shares. Early lift came from better-than-expected data on new orders for manufactured goods in May.
Investors across markets are awaiting Friday’s U.S. nonfarm payrolls data for June. The data is expected to show an increase in hiring from the previous month, but not by enough to dampen concerns that the economy is losing steam.
European shares closed at a two-month high, led by gains in commodity stocks and with lift from hopes for more stimulus as a relief rally at the start of the second half of 2012 continued.
The Thomson Reuters-Jefferies CRB index, a benchmark comprised of 19 commodities, gained 2.97 percent.
U.S. OIL INVENTORIES
U.S. crude oil stocks fell 3 million barrels last week, industry group the American Petroleum Institute said in a weekly report released late on Tuesday, more than the drop expected by analysts.
Crude stocks at the Cushing, Oklahoma, oil hub rose 247,000 barrels, while U.S. gasoline stocks fell 1.4 million barrels and distillate stocks fell 1.1 million barrels, the API said.
Ahead of the API report, U.S. crude stocks were expected to have fallen 1.9 million barrels, with gasoline and distillate stocks both seen up 600,000 barrels, according to a Reuters survey of analysts. ]
Wednesday’s U.S. holiday pushes back the U.S. Energy Information Administrations inventory data to 11 a.m. EDT (1500 GMT) on Thursday. (Additional reporting by Gene Ramos in New York, Alex Lawler in London and Ramya Venugopal and Jessica Jaganathan in Singapore; Editing by Dale Hudson, David Gregorio and Phil Berlowitz)
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