Oil surges on Iran supply concerns, QE3 expectation

Crude prices surged on Tuesday as reports said Iran might shut down oil transportation channel while investors had expected more monetary stimulus of the Federal Reserve. A member of the Iranian parliament's National Security Committee reportedly said Iran would close the Gulf to shipping at the Strait of Hormuz, the most important oil transportation channel. Although the news was later denied by Iran's Foreign Ministry spokesman, it still successfully aroused investors' speculation of oil disruption and pushed crude prices up. Meanwhile, the Fed made an announcement Tuesday afternoon after the policy-making meeting. In the trading before the Fed's press release, investors had been expecting another round of quantitative easing, the so called QE3, which bolstered market sentiment. However, the Fed only kept the record low interest rates unchanged and didn't unveil any further monetary stimulus. As it is only one day ahead of the OPEC meeting in Vienna, the markets are watching out for comments from the member states. One OPEC delegate said all 12 nations agreed that the oil cartel should set a production ceiling of 30 million barrels a day. Light, sweet crude for January delivery added 2.37 dollars, or 2.42 percent to settle at 100.14 dollars a barrel on the New York Mercantile Exchange. In London, Brent crude for January delivery went up 2.32 dollars, or 2.2 percent, to close at 109.58 dollars a barrel.